The impact of import tariffs on domestic production (Hylke Vandenbussche, Christian Viegelahn, VOX)

In a world where production is increasingly fragmented across borders, a large number of firms import their raw material inputs from abroad. This column investigates how firms’ input and output choices are affected by import tariffs on inputs that domestic firms use in production. Based on firm-product level data for India, it finds that firms decrease their use of inputs subject to the tariff, relative to other inputs. Firms also decrease their sales of outputs made of these inputs, relative to other outputs.

http://voxeu.org/article/trade-policy-affects-firms-input-and-output-choices