20 posts on "Tariffs"
June 4, 2025
Are Businesses Absorbing the Tariffs or Passing Them On to Their Customers?
U.S. import tariffs increased to historically high rates in recent months, raising the costs of many imported inputs businesses use. Businesses subject to these higher costs have been faced with difficult and complex decisions about whether to absorb the tariffs through lower profits, raise their prices to recover the higher costs, or some combination of both. These decisions are influenced by the degree of competition in the marketplace, potential customer reactions, and the ability to maintain profit margins, among other factors. Our May survey of businesses in the New York–Northern New Jersey region asked firms about the tariffs they faced, recent changes in the cost of imported goods, and whether they were passing on tariff-induced cost increases to their customers. Results indicate most businesses passed on at least some of the higher tariffs to their customers, with nearly a third of manufacturers and about 45 percent of service firms fully passing along all tariff-induced cost increases by raising their prices.
April 24, 2025
Gauging the Strength of China’s Economy in Uncertain Times
Amid increasing pressure on the Chinese economy from China’s trade conflict with the U.S., assessing the strength of the Chinese economy will be an important watch point. In this post, we provide an update on China’s recent economic performance and policy changes. While China is likely to counter growth headwinds from the escalating trade tensions with additional policy stimulus, the country’s complex fiscal dynamics and the varying interpretations of the strength of its economic growth made judgments of the efficacy of China’s policy response challenging even in a more predictable environment. In this respect, we argue that aggregate credit is a simple and effective measure to gauge policy stimulus in China. At present, China’s “credit impulse”—the change in the flow of new aggregate credit to the economy relative to GDP—appears likely sufficient to allow it to muddle through with steady but not strong growth over the next year despite the intensifying trade conflict.
March 5, 2025
Firms’ Inflation Expectations Have Picked Up
Editors note: Since this post was published, we clarified language in the first paragraph about year-ahead expectations for manufacturing and service firms in the 2025 survey. We also corrected the y-axis range of Chart 2. (March 5, 11 a.m.)
After a period of particularly high inflation following the pandemic recession, inflationary pressures have been moderating the past few years. Indeed, the inflation rate as measured by the consumer price index has come down from a peak of 9.1 percent in the summer of 2022 to 3 percent at the beginning of 2025. The New York Fed asked regional businesses about their own cost and price increases in February, as well as their expectations for future inflation. Service firms reported that business cost and selling price increases continued to moderate through 2024, while manufacturing firms reported some pickup in cost increases but not price increases. Looking ahead, firms expect both cost and price increases to move higher in 2025. Moreover, year-ahead inflation expectations have risen from 3 percent last year at this time to 3.5 among manufacturing firms and 4 percent among service firms, though longer-term inflation expectations remain anchored at around 3 percent.
February 26, 2025
U.S. Imports from China Have Fallen by Less Than U.S. Data Indicate
With new tariffs on China back in the headlines, this post seeks to offer some perspective on how much China’s exports have really been affected by multiple rounds of U.S. tariffs and export restrictions over the past seven years. The key takeaway is that U.S. imports from China have decreased by much less than has been reported in official U.S. statistics. As a result, the recent tariff increase on China could have a larger impact on the U.S. economy than is suggested by official U.S. data on the China import share, especially if favorable tariff treatment for direct-to-consumer imports is ended.
December 5, 2024
Do Import Tariffs Protect U.S. Firms?
One key motivation for imposing tariffs on imported goods is to protect U.S. firms from foreign competition. By taxing imports, domestic prices become relatively cheaper, and Americans switch expenditure from foreign goods to domestic goods, thereby expanding the domestic industry. In a recent Liberty Street Economics post, we highlighted that our recent study found large aggregate losses to the U.S. from the U.S.-China trade war. Here, we delve into the cross-sectional patterns in search of segments of the economy that may have benefited from import protection. What we find, instead, is that most firms suffered large valuation losses on tariff-announcement days. We also document that these financial losses translated into future reductions in profits, employment, sales, and labor productivity.
December 4, 2024
Using Stock Returns to Assess the Aggregate Effect of the U.S.‑China Trade War
During 2018-19, the U.S. levied import tariffs of 10 to 50 percent on more than $300 billion of imports from China, and in response China retaliated with high tariffs of its own on U.S. exports. Estimating the aggregate impact of the trade war on the U.S. economy is challenging because tariffs can affect the economy through many different channels. In addition to changing relative prices, tariffs can impact productivity and economic uncertainty. Moreover, these effects can take years to become apparent in the data, and it is difficult to know what the future implications of a tariff are likely to be. In a recent paper, we argue that financial market data can be very useful in this context because market participants have strong incentives to carefully analyze the implications of a tariff announcement on firm profitability through various channels. We show that researchers can use movements in asset prices on days in which tariffs are announced to obtain estimates of market expectations of the present discounted value of firm cash flows, which then can be used to assess the welfare impact of tariffs. These estimates suggest that the trade war between the U.S. and China between 2018 and 2019 had a negative effect on the U.S. economy that is substantially larger than past estimates.
January 6, 2021
The International Spillover of U.S. Monetary Policy via Global Production Linkages
Julian di Giovanni describes work with Galina Hale that employs an empirical framework to quantify the role of the global production network in transmitting U.S. monetary policy across international stock markets.
Posted at 7:00 am in Bank Capital, Banks, Exports, Financial Markets, International Economics, Monetary Policy, Stocks, Tariffs | Permalink
December 13, 2019
Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019
At year end, we look back at the top five most-read Liberty Street Economics posts of 2019.
August 14, 2019
Are U.S. Tariffs Turning Vietnam into an Export Powerhouse?
The imposition of Section 301 tariffs on about half of China’s exports to the United States has coincided with a fall in imports from China and gains for other countries. The U.S.-China trade conflict also appears to be accelerating an ongoing shift in foreign direct investment (FDI) from China to other emerging markets, particularly in Asia. Within the region, Vietnam is often cited as a clear beneficiary of these trends, a rising economy that could displace China, to some extent, in global supply chains. In this note, we examine the data and conclude that Vietnam is indeed gaining market share, but is too small to replace China anytime soon.
May 23, 2019
New China Tariffs Increase Costs to U.S. Households
Amiti, Redding, and Weinstein consider the cost of higher U.S. tariffs on imports from China to the typical American household.
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