Shipping Cost Shocks and US Producer Prices: Normal versus Crisis Pass-through

Summary

This paper examines how fluctuations in shipping costs pass through to U.S. producer prices. We link confidential shipment-level import transactions from the Census Bureau's Longitudinal Firm Trade Transactions Database (LFTTD) to confidential firm-level producer prices from the Bureau of Labor Statistics' Producer Price Index (PPI) microdata, constructing a monthly panel of more than 6,000 U.S. manufacturing importers from 2005 to 2022. Using local projections and Bartik-style instruments based on route-level shipping-cost variation, we find that pass-through to domestic producer prices is negligible in "normal" times but rose sharply during the COVID-19 pandemic, a period when shipping costs surged broadly across routes and source countries. We interpret this state dependence through a menu-cost model with imported intermediate inputs and endogenous substitution between imported and domestic inputs.