Working Paper: CEPR ID: DP15125
Authors: Olivier Jeanne; Jeongwon Son
Abstract: In theory, we should expect tariffs to be partially offset by a currency appreciation in the tariff-imposing country or by a depreciation in the country on which the tariff is imposed. We find, based on a calibrated model, that the tariffs imposed by the US in 2018-19 should not have had a large impact on the dollar but may have significantly depreciated the renminbi. This prediction is consistent with a high-frequency event analysis looking at the impact of tariff-related news on the dollar and the renminbi. We find that tariffs explained at most one fifth of the dollar effective appreciation but around two thirds of the renminbi effective depreciation observed in 2018-19.
Keywords: Exchange rates; Tariffs; Dollar; Renminbi
JEL Codes: F31; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tariffs imposed by the US in 2018-2019 (F14) | Dollar's effective exchange rate (F31) |
| Tariffs imposed by the US in 2018-2019 (F14) | Renminbi's effective exchange rate (F31) |
| 10% import tariff (F14) | Home currency appreciation (F31) |
| 10% export tariff (F10) | Home currency depreciation (F31) |
| News about US tariffs (F19) | Dollar appreciation (F31) |
| News about US tariffs (F19) | Renminbi depreciation (F31) |
| Tariffs (F19) | Dollar's effective appreciation (F31) |
| Tariffs (F19) | Renminbi's effective depreciation (F31) |
| Tariffs on exports (F14) | Exchange rate offset (F31) |
| Tariffs on imports (F14) | Exchange rate offset (F31) |