Abstracts Economics

Implicit Cost of Retaliatory Tariffs by Mexico on U.S. Cheese Export

by Pengyan Sun

Mexico imposed retaliatory tariffs on U.S. cheeses ranging from 20 to 25 percent in July 2018. In order to provide valuable information for the government and farmers, my research estimated the implicit cost of retaliatory tariffs by Mexico on U.S. cheese exports. In particular, I estimate the difference between the forecasted value of cheese exported to Mexico and the actual value of cheese exported to Mexico using four different models. The total impact to the U.S. economy from the losses due to retaliatory tariffs was assessed by IMPLAN, an input/output model. The results showed that Mexican tariffs decreased U.S. industry output by 354 million, value-added by 112 million, labor income by 68 million, and job by 1074 jobs respectively, on average. Decreasing exports in the long run is expected to decrease labor income and increase job losses in the U.S. which can increase social instability. Therefore, Mexico's retaliatory tariffs triggered by the U.S. trade war have had a great negative impact on the U.S.