Foreign producers reduced their prices by 5.2 percent relative to the control group following the 25 percent tariff, absorbing about 20 percent of the tariff rate. The remaining 80 percent was passed forward as higher costs to US importers. On a bottle of wine for which the producer charged $5 before the tariff was imposed and $4.74 after, the tariff payment would have been $1.19. Importers, who the researchers estimate apply an 80 percent markup to the price they pay to producers, would have charged $9 to distributors before the tariff was imposed. The researchers estimate that they raised their prices to distributors by 5.4 percent, but on a base of $9 (= 1.8 x $5). This increase would be $0.49, so importers would be absorbing additional costs since they would pay $5.93 (= 1.25 x $4.74) to the producer and in tariffs. All told, the importer’s dollar margins per bottle declined by $0.44.
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