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Relocation and Price Effects of United States Trade Policy

Paper Session

Sunday, Jan. 5, 2020 1:00 PM - 3:00 PM (PDT)

Marriott Marquis, Grand Ballroom 3
Hosted By: American Economic Association
  • Chair: Thomas Holmes, University of Minnesota and Federal Reserve Bank of Minneapolis

United States Special Protection in Historical Perspective: 1974–2019

Chad P. Bown
,
Peterson Institute for International Economics

Abstract

How large was the US special protection of 2018 and 2019? The United States has been at the forefront of rationalizing trade policy in the post-war period by transforming all sorts of non-tariff barriers into tariffs and negotiating their reduction. At the same time, it has also turned to acts of "special protection" under a variety of US trade laws, as well as other ad hoc programs, when the need for new trade barriers arose. Relying on a recently developed database, I construct new measures of trade protection in the form of import coverage ratios that allows for relative comparisons of US acts of special protection over 1974-2019. The Trump administration’s actions by 2019 resulted in 18 percent of US total goods imports becoming subject to special protection, higher than at any point since at least 1974. The new measures allow for a decomposition into changes across trading partners and sectors impacted by the US special protection, as well as the changing nature of the policies and implications for the rules-based trading system.

The Production Relocation and Price Effects of United States Trade Policy: The Case of Washing Machines

Aaron Flaaen
,
Federal Reserve Board
Ali Hortacsu
,
University of Chicago
Felix Tintelnot
,
University of Chicago

Abstract

We analyze several rounds of U.S. import restrictions against washing machines. Using retail price data, we estimate the price effect of these import restrictions by comparing the price changes of washers with those of other appliances. We find that in response to the 2018 tariffs on nearly all source countries, the price of washers rose by nearly 12 percent; the price of dryers---a complementary good not subject to tariffs---increased by an equivalent amount. Factoring in the effect of dryers and price increases by domestic brands, our estimates for the 2018 tariffs on washers imply a tariff elasticity of consumer prices of between 110 and 230 percent. The 2016 antidumping duties against China – which accounted for the overwhelming majority of U.S. imports -- led to minor price movements due to subsequent production relocation to other export platform countries. Perhaps surprisingly, the 2012 antidumping duties against Korea led to relocation of production to China, actually resulting in lower washer prices in the United States. We find that our measure of the tariff elasticity of consumer prices may differ in sign and magnitude from conventional pass-through estimates which are based on a regression of country-specific import price changes on country-specific tariff changes. Production relocation effects, price changes by domestic brands, and price changes of complementary goods all contribute to the differences between these measures.
JEL Classifications
  • F1 - Trade
  • F6 - Economic Impacts of Globalization