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Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy

2019-10-11

Time:4:00pm - 5:30pm, Oct 11, 2019

Venue:Room 359S, Overseas Exchange Center, Peking University

Speaker:Alberto Cavallo

(Harvard Business School)

 

Abstract:

 

We use micro data collected at the border and at retailers to characterize the effects brought by recent changes in US trade policy -- particularly the tariffs placed on imports from China -- on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to total prices paid by importers, suggesting the tariffs' incidence has fallen largely on the US. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of the Chinese Renminbi is unlikely to alter this conclusion. Next, using product-level data from several large multi-national retailers, we demonstrate that the impact of the tariffs on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen. These retailers' imports increased after the initial announcement of tariffs, so the intermediate passthrough of tariffs to their prices may not persist. Finally, in contrast to the case of foreign exporters facing US tariffs, we show that US exporters lowered their prices on goods subjected to foreign retaliatory tariffs compared to exports of non-targeted goods.

 

Speaker:

 

Alberto Cavallo is the Edgerley Family Associate Professor at Harvard Business School, where he teaches in the Business, Government, and the International Economy (BGIE) unit, a Faculty Research Fellow at the National Bureau of Economic Research, and a member of the Technical Advisory Committee of the US Bureau of Labor Statistics (BLS). Professor Cavallo's research focuses on the behavior of prices and its implications for macroeconomic measurement and policies. His work is based on the use of daily data collected from hundreds of online retailers around the world. He co-founded The Billion Prices Project, an academic initiative at MIT and Harvard University that pioneered the use of online data to conduct research on high-frequency price dynamics and inflation measurement. He also created Inflacion Verdadera to measure the real inflation rate in Argentina and Venezuela and co-founded two private companies: Dineromail, the first online-payments company in Latin America, and PriceStats, the leading private source of inflation and PPP statistics. He received a Ph.D. from Harvard University in 2010, an MBA from MIT Sloan in 2005, and a B.S. from Universidad de San Andres in Argentina in 2000.