US tariff levels now at emerging market levels

Menzie Chinn 08 October 2018

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First posted on: 

Econbrowser, 27 September 2018

The following graph compares average tariff levels across countries.

One can take comfort from the fact US tariff rates are historically low.

I have two observations:

  • We live in an era of global value chains, so that the value added has been chopped up and split across nations. In this context, a tariff of 10% on final value is a lot more than 10% on value added.
  • This shock to global value chains comes on the back of an already stretched logistics network.

The latter point is highlighted by the following graph:

The latter is perhaps a temporary phenomenon, likely to end when the economy goes into recession. However, the former is likely more persistent.

Global value chains have been built up over decades; rejiggering these chains to accommodate tariffs of indefinite duration is sure to be disruptive, possibly inflationary (although that depends on monetary policy).

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Topics:  International trade

Tags:  tariffs, US, protectionism, Trump

Professor, Robert M. La Follette School of Public Affairs and Department of Economics, University of Wisconsin

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