D3

Presentation at VHB Anniversary Conference 2022 by Ayşe Özdoğan

16/03/2022

Importer Behavior After Targeted Tariff Increases: A Firm Level Analysis

This paper presented analyses the impact of targeted tariff increases on importer behavior. Since tariff increases may distort importer firms’ raw material acquisition cost structure, they may lead importers to change their importing behavior. To mitigate increasing importing costs, firms can ideally turn to the domestic market, however they can also change their international supply base to unaffected countries or even illegally evade tariffs. The recent tariff increases in the US provide a unique opportunity to analyze this behavior in a large open economy through importer level trade and financial data. Empirical results indicate a short-term significant impact of increasing tariff rates on increasing costs, which however does not hold in the long term. This result is likely to be due to their immediate change in behavior as further empirical results indicate significant association between change in cost and the probability of a supply base change.