Aaron Flaaen | Who Pays for Tariffs Along the Supply Chain? Evidence from European Wine Tariffs

The Moynihan Institute’s program for Trade, Development and Political Economy welcomes Aaron Flaaen from the Federal Reserve Board.

Paper Abstract

We study how tariffs affect prices along the supply chain using product-level data from a large U.S. wine importer during the 2019-2021 U.S. tariffs on European wines. Combining confidential transaction prices with foreign suppliers, U.S. distributors, and retail prices, we trace tariff pass-through from producers to consumers. Pass-through at the border is incomplete, yet consumers paid more than the tariff revenue collected. The dollar markups per bottle for the importer contracted, but expanded for the combined distributor-retailer segment. Price changes along the chain reached consumers after one year. We also document tariff engineering that biases unit values in trade statistics.

Co-authors

• Ali Hortascu
• Felix Tintelnot
• Nicolas Urdaneta
• Daniel Xu

Aaron Flaaen is a principal economist and group manager in the Research and Statistics Division of the Board of Governors of the Federal Reserve System in Washington, D.C. 

In addition to studying the industrial sector and supply chain linkages, his board-related work centers on exploring expanded economic measurement with non-traditional data sources. His academic research has been published in a variety of peer-reviewed journals and focuses on the causes and consequences of multinational firms and global trade.  More recently, his work has focused on the effects of the 2018-2019 U.S.-China trade dispute on consumer prices and the U.S. manufacturing sector. 

In 2015, his research was awarded the Young Economist Essay award by the World Trade Organization. Findings from his research have been summarized in major news outlets such as The New York Times, The Wall Street Journal, the Economist, and The Washington Post. 

Flaaen is also an adjunct professor at Georgetown University, where he has taught international trade theory and policy since 2017. He holds a Ph.D. in economics from the University of Michigan.