The Return to Protectionism*
By Pablo D. Fajgelbaum, P. Goldberg, P. Kennedy, Amit K. Khandelwal. Quarterly Journal of Economics, 2019
487 citations recorded by the source corpus.
After decades of supporting free trade, in 2018 the United States raised import tariffs and major trade partners retaliated. We analyze the short-run impact of this return to protectionism on the U.S. economy. Import and retaliatory tariffs caused large declines in imports and exports. Prices of imports targeted by tariffs did not fall, implying complete pass-through of tariffs to duty-inclusive prices. The resulting losses to U.S. consumers and firms that buy imports was $51 billion, or 0.27% of GDP. We embed the estimated trade elasticities in a general-equilibrium model of the U.S. economy. After accounting for tariff revenue and gains to domestic producers, the aggregate real income loss was $7.2 billion, or 0.04% of GDP. Import tariffs favored sectors concentrated in politically competitive counties, and the model implies that tradeable-sector workers in heavily Republican counties were the most negatively affected due to the retaliatory tariffs. JEL Code: F1.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/f0b8593a75816a190a5f71a0f4d60f6da48c1862
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In Economics and Econometrics
Citations in the corpus
- The Long and Short (Run) of Trade Elasticities (2020, background): “Closely related to our paper is Fajgelbaum et al. (2020), who use the trade war as a shock to simultaneously estimate demand and supply elasticities. Our approach in contrast isolates variation coming from (3)An exception to the common finding of high long-run trade elasticities is Sequeira (2016), ”
- Poverty and economic dislocation reduce compliance with COVID-19 shelter-in-place protocols (2020, unknown): “Next, we account for the correlation between local economic endowments and (c) exposure to the ongoing trade war (Fajgelbaum et al., 2020), (d) political partisanship, and (e) exposure to slanted media coverage of the COVID-19 pandemic.”
- Networks, Barriers, and Trade (2019, unknown): “We also show how nominal rigidities can help to explain why, in the short-run, a disruption in trade can cause domestic unemployment, as in Rodr´ıguez-Clare et al. (2020), and result in complete pass-through of tariffs into consumer prices, as in Fajgelbaum et al. (2020).”