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Federal Reserve Concludes 2018 Tariffs Hurt Motor Vehicle Industry Significantly

Date: January 7, 2020

The Federal Reserve Board published a study discovering that the motor vehicle industry was among the top 10 industries hit by retaliatory tariffs in 2018. In addition, the study found that the transportation equipment industry was among the top ten industries affected by higher prices.

The study, titled “Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector,” was conducted by Federal Reserve Board members Aaron Flaaen and Justin Piece. Published in 2019, the study looked to see if the tariffs imposed by the Trump administration in 2018 were successfully boosting the manufacturing sector.

“A key feature of our analysis is accounting for the multiple ways that tariffs might affect the manufacturing sector,” the study reads, “including providing protection for domestic industries, raising costs for imported inputs, and harming competitiveness in overseas markets due to retaliatory tariffs. We find that U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment as a positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices via rising input costs.”

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