## Tariff Pass-Through and Import Reallocation

_IMF Working Papers, July 17, 2026_

## Source details

**Canonical URL:** [Tariff Pass-Through and Import Reallocation](https://www.imf.org/en/publications/wp/issues/2026/07/17/tariff-pass-through-and-import-reallocation-577819)

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## Bibliographic details
- Authors: JaeBin Ahn, Lorenzo Rotunno, Michele Ruta
- Published: July 17, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229054171.001

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### Core findings
- Duty-exclusive import prices at the variety (country-product) level do not adjust to tariffs, implying full pass-through to duty-inclusive prices at the border.
- At the product level, duty-exclusive aggregate import prices decline significantly with tariff increases.
- The product-level decline is driven by within-product reallocation toward lower-priced sources—stronger in products facing larger tariff hikes.
- Reallocation operates primarily through:
  - Entry of lower-priced varieties.
  - Exit of higher-priced varieties.
- Estimates of variety appeal indicate that part of this reallocation reflects shifts toward lower-quality varieties; this quality channel is also present in the 2018–19 U.S.–China tariff episode.

### Mechanisms and empirical evidence
- Full pass-through at the variety level: duty-exclusive prices for a given country-product variety do not change with tariff hikes.
- Aggregate product-level response: despite no variety-level adjustment, the composition of sourcing within products shifts, producing a decline in duty-exclusive aggregate import prices.
- Composition effects: within-product reallocation is stronger for products facing larger tariff hikes.
- Quality channel: measured shifts in variety appeal point to movement toward lower-quality varieties as part of the reallocation.

### Implications
- Consumer welfare:
  - Reallocation toward lower-priced and partly lower-quality varieties affects the quality of imported consumer goods.
- Productivity and inputs:
  - Quality changes in imported inputs may affect downstream productivity through altered input quality.
- Historical consistency:
  - The quality reallocation channel is present both in the 2025 U.S. tariff episode studied and in the 2018–19 U.S.–China tariff episode.

### Key statistics and publication identifiers
- Pages: 45
- Volume: 2026
- Issue: 149
- Series: Working Paper No. 2026/149
- DOI: https://doi.org/10.5089/9798229054171.001
- Stock No: WPIEA2026149
- ISBN: 9798229054171
- ISSN: 1018-5941
- Authors: JaeBin Ahn, Lorenzo Rotunno, Michele Ruta
- Date: July 17, 2026

*IMF Working Paper: "Tariff Pass-Through and Import Reallocation" — JaeBin Ahn, Lorenzo Rotunno, Michele Ruta (July 17, 2026).*

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_Source: https://www.imf.org/en/publications/wp/issues/2026/07/17/tariff-pass-through-and-import-reallocation-577819_