← Search

Consumer Credit and the Incidence of Tariffs: Evidence from the Auto Industry

Kristine W. Hankins¹; Morteza Momeni²; David Sovich¹

¹ University of Kentucky (email: ) · ² Tennessee Tech University (email: )

Captive finance subsidiaries create a channel for trade policy to affect consumer credit. Examining the impact of the Trump administration’s metal tariffs on captive automobile lenders, we find that consumers received higher interest rates from captive lenders after the tariffs relative to unaffected noncaptive lenders. Further, we document a disparate impact on low-income borrowers and in areas with less lending competition. Our results suggest that tariffs may impact not only the price of goods but also the financing terms of purchases. Thus, focusing solely on directly affected product prices may underestimate tariff pass-through significantly. (JEL F13, F14, G21, L22, L61, L62)

DOI

10.1257/aer.20230432

Volume

116 (2)

Pages

627-673

Language

en

Export

BibTeX

Sources

openalex crossref