When the United States imposed tariffs on Canadian steel and aluminum in 2018, Canada responded with retaliatory tariffs on US goods worth 16. 6 billion. I analyze how much of these tariffs passed through to import prices. The extent to which import prices increase because of tariffs is the tariff pass-through rate. A lower pass-through indicates that foreign exporters—rather than domestic importers—paid for most of the tariffs, implying better welfare consequences for the tariff-imposing country. Using Canadian import data and retaliation information, I exploit a triple-difference strategy to estimate the pass-through of Canada's retaliatory tariffs. On average, import prices increased to reflect the full tariffs, leading to zero terms-of-trade gains and welfare losses of 464 million. Thus, each dollar of the 1. 76 billion tariff revenues raised imposed an average cost of 1. 26 on Canadian importers. However, product-level analysis reveals that pass-through was incomplete for a subset of the targeted US products.
Tazia Khushboo (Mon,) studied this question.