On the Distributional Effects of International Tariffs

Abstract

We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the United States and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor, and capital income, the average welfare loss from the trade war is equivalent to a permanent 0.1% reduction in consumption. Much larger welfare losses are concentrated among retirees and low‐wealth households, whereas only wealthy households experience a welfare gain.

The effect of economic uncertainty on remittance flows from developed countries

“…The uncertainty driven by geoeconomic fragmentation can result in higher trade costs (WTO, 2023) by driving up prices of intermediates and final goods (e.g. Carroll & Hur, 2023;Fajgelbaum et al, 2019) À hence making imports of goods and services more expensive À and limit access to a wide range of products to fit consumers' needs, preferences, and budget (e.g. Amiti et al, 2019).…”