Upcoming tariffs can actually lower prices and expand economic output in the short term because firms 'front-run' the tax.
March 31, 2026
Original Paper
Tariff Front-Running
SSRN · 6471019
The Takeaway
When a future tariff is announced, companies rush to import massive amounts of inventory to beat the price hike. This surge in supply creates a temporary downward pressure on prices and a boost in output, potentially making a trade war look economically beneficial in the months before the tax actually takes effect.
From the abstract
We examine US firms' responses to future tariff increases and their macroeconomic implications. We build a novel firm-level import dataset spanning from 2012 to 2019, a period covering the 2018-2019 trade war on steel, aluminum, and Chinese imports. We find a significant front-running response to tariffs. First, firms' imports, inventories, and their number of product-country partners begin to increase four quarters before a tariff increase. Second, before a specific product-country is affected