Tariff Pass-Through and Welfare in the Tablet Computer Market

This paper estimates the short-run effects of tariffs on United States tablet computer prices and welfare. Market-level data are used to estimate a model of demand, supply and trade policy and to simulate equilibria prices and sales in scenarios with tariffs on Chinese production. A 25 percent tariff on firms assembling in China results in a tariff elasticity of tablet prices for taxed firms of 1.108, a 29.6 percent decline in profits for firms assembling in China, and a deadweight loss of 28.8 percent of total economic surplus. Firms assembling elsewhere benefit from the reduction in rival’s competitiveness by increasing their prices, market shares and profits. A long-run implication is that firms may be incented to shift production from “uncompetitive” facilities in China to lower-cost countries that are politically favored by the United States.