Template-Type: ReDIF-Paper 1.0
Title: Who Pays for the Tariffs and Why? A Tale of Two Countries
Author-Name: Chaonan Feng
Author-Email: fengcnhpy@126.com
Author-Name: Liyan Han
Author-Email: hanly@buaa.edu.cn
Author-Name: Lei Li
Author-Email: lei.li@uni-mannheim.de
Classification-JEL: F13, F14, F61
Keywords: trade war, tariff pass-through, import structure, product heterogeneity, demand elasticity, supply elasticity

Abstract: During the U.S.-China trade war, the U.S. punitive tariffs were almost entirely borne by U.S.
importers. In contrast, only 68% of China’s retaliatory tariffs were paid by Chinese importers.
The puzzling difference between the U.S. and China is mainly driven by their different import
structures and product heterogeneity in tariff pass-through. China mainly imported products
with lower tariff pass-through from the U.S., such as agricultural products and aircraft, while the
U.S. primarily imported products with higher tariff pass-through from China, such as electronics.
Furthermore, we decompose the product-level tariff pass-through and show that a higher ratio of
import demand elasticity over export supply elasticity leads to lower tariff pass-through under
perfect competition.


Note: 
Length: 67
Creation-Date: 2023-06
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp432
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_432