So be prepared. From Feng, Han, and Li (2023):
As noted in the article, machinery, electronics and optical equipment accounted for a lot of imports as a share of total US imports for these categories, so these pass-through coefficients pertain to substantial amounts of imports.
Now, I can’t say the high pass-through estimates are a surprise, given Cox and Russ (2020) and references cited therein, but for some people, it bears repeating (over and over and over again).
Now, Zerohedge in a rare moment of coherence, notes the possibility of Beijing devaluing the CNY in response to tariffs. Well, duh! Of course, depreciation wouldn’t be costless, given fears that this would spur capital flight. Still, maybe useful to consider what happened the last time Mr. Trump started a trade war with China.
Figure 1: CNY/USD, in logs 2018M04=0. Source: Federal Reserve.
The CNY depreciated over 12% against the US dollar.
Addendum:
Contreras, Lovely and Yan provide a more detailed assessment of hits under 60% tariffs.
