2025/09/01 by Tazia Khushboo · 1 voice
Social Sciences · Economics, Econometrics and Finance · #Canadian Policy and Governance #Global trade and economics #Fiscal Policy and Economic Growth
paper · pdf · doi:10.3138/cpp.2025-006
openalex publication_date 2025/09/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
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.