Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244257 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 2021-08
Publisher: 
Federal Reserve Bank of Chicago, Chicago, IL
Abstract: 
We develop a quantitative framework to assess the cross-state implications of a U.S. trade policy change: a unilateral increase in the import tariff from 2% to 25% across all goods-producing sectors. Although the U.S. gains overall from the tariff increase, we find the impact differs starkly across locations. Changes in real consumption (welfare) range from as high as 3.8% in Wyoming to -0.3% in Florida, depending mainly on how exposed states are to differentially-impacted sectors. As a result, the "preferred" tariff rate varies greatly across states. Foreign retaliation in trade policy substantially reduces the welfare gains across states, while perpetuating the cross-state variation in those gains. The presence of internal trade frictions amplifies the welfare impacts of changes in trade policy.
Subjects: 
International trade
Interstate trade
Welfare gains from trade
JEL: 
F11
F62
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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