Junjie Guo and Ananth Seshadri
Executive Summary:
- Tariffs are taxes collected by the government from domestic firms when they import goods from other countries. The burden of higher tariffs could be passed on to
consumers in terms of higher prices and to foreign exporters if they are forced to reduce their prices due to lower demand. - Evidence from President Trump’s first term suggests that the burden of tariff hikes fell almost entirely on domestic consumers and importers. Furthermore, the import and
retaliatory tariffs had a negative effect on the U.S. economy even after accounting for the positive effect on customs duties and domestic producers. - With tariff hikes, Wisconsin households and firms face higher prices and production costs related to imports, while the state government does not benefit directly from
increased customs duties. - The three countries (Canada, China, and Mexico) at the center of President Trump’s recent tariff actions are Wisconsin’s top three trading partners, accounting for about
half of Wisconsin’s imports and exports. - Products Wisconsin imports almost exclusively from these countries are more vulnerable to import tariffs against these countries, e.g., almost all live animals and
fertilizers imported to Wisconsin come from Canada. - Products Wisconsin exports almost exclusively to these countries are more vulnerable to retaliatory tariffs by these countries, e.g., almost all beverages, spirits and
vinegar exported from Wisconsin go to Canada. - Sustained tariff hikes against Canada, China and Mexico and retaliatory tariffs by these countries will have a negative impact on Wisconsin’s economy.