An eye for an eye? The trade and price effects of China's retaliatory tariffs on US exports*

We analyze the trade and price effects of China's retaliatory tariffs on imports from the United States in the period from January 2017 to May 2019. We apply the difference-in-differences approach to the up-to-date China Customs data on imports disaggregated by eight-digit HS product category and source country. We find large reductions in the value and quantity of imports from the US and an almost complete tariff pass-through onto import prices. These results remain robust to extensive changes in the specification and in data sample and to a variety of placebo tests using processing imports or exempted products that were originally included in the tariff lists but removed before implementation. We also find that the trade and price effects are heterogeneous across products, differing either in the end-use or in the ownership types of the importing firm. Similar to recent findings in the US (Amiti et al., 2019, 2020), our estimates suggest limited terms-of-trade gain due to China's tariff hikes.

Automated summary

The study found that China's retaliatory tariffs on imports from the United States led to significant reductions in both the value and quantity of imports, with the tariffs almost completely passed on to import prices. The trade and price effects varied across different products, indicating limited terms-of-trade gain due to the tariff hikes.