Firms anticipate upcoming tariff changes by shifting their purchases to periods with lower costs. This paper shows that such anticipatory dynamics overstate the trade elasticity. Standard identification of the trade response to trade cost changes uses tariff variation from free trade agreements and assumes that trade flows equal their consumption. However, free trade agreements eliminate tariffs gradually through announced phaseouts. This allows firms...
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INFORMATION
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2021/04/29
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Document de travail de recherche sur les politiques
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WPS9646
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1
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1
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2021/04/29
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Disclosed
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How Does Trade Respond to Anticipated Tariff Changes ? Evidence from NAFTA
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consumption
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