117. Trump’s Import Tariffs Have Hurt US Exports

Episode Summary

Executive Summary: This episode examines research showing that Trump-era import tariffs on intermediate inputs did not just raise costs for U.S. firms—they also slowed those firms’ export growth. Using linked Census trade data, the authors find that the most tariff-exposed supply chains are concentrated among large, globally active firms, and that tightly connected import-export products saw materially weaker export growth.

Main Topics: Tariffs on imports can depress exports (Priority: 5/5): The central finding is that tariffs imposed on imported inputs raised costs, disrupted supply chains, and reduced export growth among affected U.S. firms. Linked importer-exporter firms dominate trade (Priority: 5/5): Many U.S. importers are also exporters, and these dual-trade firms are disproportionately large and account for a major share of U.S. trade. Method: using pre-trade-war firm trade patterns (Priority: 4/5): Because firm-level data for 2017-2019 were unavailable, the study uses 2016 Census linked trade transactions to infer persistent import bundles and exposure to later tariffs. Supply-chain specificity matters (Priority: 5/5): Broad tariff exposure measures were weaker, while finely matched product-level links within firms’ supply chains produced stronger evidence of reduced export growth. Retaliation and policy spillovers (Priority: 4/5): The transcript notes that foreign retaliation also affected U.S. exporters, creating a second channel of harm that must be accounted for in estimating tariff effects. Policy implications for trade deficits (Priority: 5/5): If import tariffs reduce exports as well as imports, they may fail to shrink—and could even widen—the trade deficit, especially when aimed at intermediate goods.

Key Arguments: U.S. firms that import are often the same firms that export, so import tariffs can impair export performance through shared supply chains. The authors infer tariff exposure from 2016 firm trade patterns because import sourcing is relatively sticky over time and difficult to observe contemporaneously at the firm level. Tightly linked supply-chain products are where the effects are strongest; broad exposure alone does not explain the decline in export growth. The estimated export slowdown is large relative to pre-trade-war export growth rates, suggesting tariffs meaningfully altered firm behavior. Cost increases are only part of the story; uncertainty and the expense of changing suppliers likely also reduced export growth. Tariffs targeted at intermediate inputs may be counterproductive if the goal is to reduce the trade deficit, because they can suppress exports too. Retaliation by trading partners affected a non-trivial share of U.S. exporters and workers, amplifying the trade-war impact.

Data Points: Share of U.S. exports attributable to tariff-hit firms: 84% - Based on 2016 trade patterns, firms later hit by import tariffs accounted for most U.S. exports. Share of U.S. exporters also paying a tariff: About one-third - Measured by firm count among exporters/importers exposed to the tariffs. Estimated tariff cost per worker in the whole economy: About $900 per worker - Implied duties if firms did not change their input bundles. Estimated tariff cost per worker in manufacturing: About $1,600 per worker - Duty burden for affected manufacturing firms. Tariff cost as share of payroll: About 1% to 2% - Approximate burden relative to affected firms’ payrolls. Share of U.S. exports affected by retaliation: About 8% - Exports hit by foreign retaliation against U.S. tariffs. Share of exporting firms affected by retaliation: 20% - Firm-level exposure based on 2016 export patterns. Share of non-farm private sector employment affected by retaliation: 23% - Employment at firms exporting retaliated-against products. Number of importing firms in the data: Around 300,000 - Scale of firms importing in the Census-linked data. Number of exporting firms in the data: Around 300,000 - Scale of firms exporting in the Census-linked data. Firms doing both importing and exporting: Around 80,000+ - Subset of firms engaged in both import and export activity. Export growth decline in more exposed products: 2% lower - Average decline from Q4 2018 to Q3 2019 for products more exposed within supply chains. Prior quarter export growth benchmark: 4% to 8% - Typical quarter-to-quarter export growth in 2017 and early 2018 before the trade war. Potential reduction if tariffs were not tightly linked to supply chains: About 60% lower decline - Authors estimate the export-growth decline would have been substantially smaller without closely connected supply-chain targeting.

Pivotal Quotes: "Rising Import Tariffs, Falling Export Growth, When Modern Supply Chains Meet Old Style Protectionism." — Host introduction: Title of the paper discussed in the episode. "about 84% of US exports in 2016" — Kyle Hanley: Describing how concentrated the affected firms were in U.S. export activity. "if import tariffs are targeted on intermediate inputs, then it could be counterproductive to the administration's goals." — Kyle Hanley: Final takeaway on how import tariffs may worsen, rather than reduce, the trade deficit.

Implications: The episode suggests tariffs on imported inputs can weaken export competitiveness, especially for globally integrated firms. For industry, supply-chain disruption and uncertainty may be as costly as the tariffs themselves. For policy, the trade deficit may not improve if exports fall alongside imports.