Cambridge Business Association
Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector
Report

Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector

Aaron Flaaen and Justin Pierce
Federal Reserve Board, 2019
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Recommendation

The tariff feud between the United States and China provides a unique window through which scholars can assess the wider effects of trade levies in economies interlinked through global supply chains. In their erudite study for executives and analysts, economists Aaron Flaaen and Justin Pierce find that US tariffs have so far failed to protect domestic industries, as input costs have risen and China’s retaliatory efforts have counteracted any hoped-for benefits.

Summary

Three escalating events ramped up the trade skirmishes between the United States and China over the course of 2018. 

First, in early February 2018, the US imposed taxes on foreign washing machines and solar panels, with the rationale that imports of such merchandise could substantially harm American manufacturers of those goods. Second, in March, the United States placed substantial levies on imports of aluminum (10%) and steel (25%), based on a possible threat to US national security. China and other US trading partners retaliated with tariffs on agricultural products in addition to aluminum and steel. 

Third, the United States applied tariffs on a wide ...

About the Authors

Aaron Flaaen and Justin Pierce are economists at the Federal Reserve Board.

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