A U.S. $100 banknote is placed on a 100 yuan banknote in this photo illustration taken in Beijing October 17, 2010.

Publication Type

To what extent are tariffs offset by exchange rates?

Working Papers 20-1
Photo Credit: REUTERS/Petar Kujundzic


In theory, tariffs are partially offset by a currency appreciation in the tariff-imposing country or by a depreciation in the country on which the tariff is imposed. Based on a calibrated model, this paper finds that US tariffs imposed in 2018 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. Tariff-related news explains about one-third of the renminbi depreciation observed in 2018.

Data Disclosure:

The data underlying this analysis are available here.

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