Author Archives: Menzie Chinn

Bringing Down Grocery Prices, Trump Style

CPI food at home is 8% of total CPI weights, fresh vegetables and fruit are 1.1%. Assume half of fresh vegetable and fruit are imported from Mexico (about 2/3 of fresh vegetables are imported from Mexico), and assume only half of the 25% tariff is passed on to US consumers (large country assumption). Then here’s a picture of the CPI for groceries, the January USDA ERS forecast and the implied level of grocery prices, assuming the tariffs are eventually placed.

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The Price Elasticity of Avocado Supply, Demand, and Tariff Pass Through

I was pondering whether the US is a large country insofar as tariffs on avocados are concerned. Since 90% of consumption is from Mexico, one might think the US is a large country; on the other hand, elasticities matter. This study by Ambrozek et al. (2019) indicates 0.2 demand elasticity at shipper level. Let’s guess that supply elasticity is 0.2 (about 80% of Mexican exports go to the US, and about 85% of production is exported; Carman and Kraft (1998) cite 0.2.

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