Supply Chain Adjustments to Tariff Shocks: Firm Trade Linkages in the 2018-2019 US Trade War

Supply Chain Adjustments to Tariff Shocks: Evidence From Firm Trade Linkages in the 2018-2019 U.S. Trade War

Kyle Handley, Fariha Kamal, Ryan Monarch

Economics Letters, October 2024

Ryan Monarch

Economics Department

Trade, Development, and Political Economy Working Group

International Affairs

Taxation

Trade

United States

Economics Letters

Ryan Monarch

We use the 2018-2019 U.S. trade war to examine how supply chains adjustments to a tariff cost shock affect imports. Using confidential trade data, we show that the decline in U.S. imports of tariffed goods during the trade war was driven primarily by the exit of firms from import markets, discontinued buyer–supplier relationships, and reduced entry into importing. However, tariffed products where imports were concentrated in fewer suppliers exhibited smaller declines in import growth.