Board of Governors of the Federal Reserve System
03/20/2026 | Press release | Distributed by Public on 03/20/2026 08:43
The Design and Effect of Tariff Retaliation: Evidence from the European Union
March 2026
The Design and Effect of Tariff Retaliation: Evidence from the European Union
Ece Fisgin, Johannes Fleck, Keith Richards
Abstract:
We show that the EU's 2018 retaliation against US steel and aluminum tariffs targeted goods with low US import dependence and high substitutability. For the majority of tariffed goods, the US share of EU imports declined notably and remained below pre-2018 levels even after the retaliatory tariffs were lifted, reflecting asymmetric effects of tariffs on trade diversion. Moreover, although the retaliatory tariffs were instantly and fully passed through to EU importers, the retaliation did not lead to domestic price pressures as we find no evidence for inflationary effects on consumer and producer prices.
Keywords: Trade Wars, Retaliatory Tariffs, Tariff Pass-Through, Inflation, US-EU Trade Relations
DOI: https://doi.org/10.17016/IFDP.2026.1436
PDF: Full Paper
Board of Governors of the Federal Reserve System published this content on March 20, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on March 20, 2026 at 14:44 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]