Export pricing and the macroeconomic effects of US import tariffs

Abstract

We modify NiGEM in order to study the macroeconomic effects of imposing import tariffs in the US under different assumptions regarding the long-run price setting behaviour of exporters. Overall, the macroeconomic implications in the US resemble the impact of a cost shock or adverse supply shock as prices increase while output declines. Due to exchange rate movements and changes in the prices of traded goods, prices and output in other economies tend to move in the same direction. We demonstrate that the size and persistence of the macroeconomic impact following the introduction of new tariffs critically hinge upon the specific assumptions underlying the behaviour of export prices. If foreign exporters are concerned about their net-of-tariff prices, there will be little adjustment after the initial surge in tariff-inclusive export prices. As a result, the adverse macroeconomic impact will be large and persistent both in the US and abroad. While additional government spending financed by tariff revenues could mitigate the adverse impact on the protectionist economy in the short run, retaliation by its trading partners would worsen the outcome. Our simulations also raise doubts about the ability of protectionist measures to rein in global imbalances.

International trade and investment: A review and research agenda

“…As studied by Casanova and Rodríguez-Montemayor (2014), a global economic triangulation was formed by Spain, Asia, and Latin America to facilitate trade between these nations despite distance, knowledge, and linguistic barriers. The growth in international trade has been three times compared to 1950s and is also driven by noncommodity exports like technology-related products (Riad et al, 2012;Slopek, 2018). Table 4 shows that there has been a strong support from China, one of the world's largest exporters and importers, regarding the acquisition of strategic assets that are technology-driven (Shi et al, 2022).…”

EUROPEAN FISCAL RULES AS A LIABILITY IN THE TRANSATLANTIC TRADE CONFLICT: LESSONS FROM NiGEM SIMULATIONS

“…However, this modelling strategy only represents one of several possible channels through which tariffs may affect the economy. Depending on the market structure, there may be other reactions, which will be examined in more detail below (Slopek, 2018).…”

“…This assumption is based on the possibility that there might be a change of power in the US in November 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2020 and that the new administration might withdraw the protectionist measures introduced by its predecessor, given some changeover time. Several studies point out that the magnitude of the effects depends largely on the price-setting behaviour of exporters (Deutsche Bundesbank, 2017;Slopek, 2018). In the case of a temporary trade conflict, we assume that exporters do not pass on the costs of tariffs to consumers but instead absorb them at the expense of their profit margins.…”

Empirical Analysis of Factors Influencing China's Imports and Exports

“…Nevertheless, when delving into the determinants of import and export volumes, there has been a tendency to overlook the dynamic temporal shifts in macroeconomic factors. While tariff barriers and comparative advantages remain focal points, understanding the nuanced impact of changing macroeconomic conditions over time is crucial for a comprehensive analysis of a country's trade dynamics [1]. The ever-evolving macroeconomic landscape within the domestic sphere unquestionably wields a substantial impact on the import and export trade dynamics of China.…”