Tariff Shocks as Natural Experiments: Pass-Through, Market Structure, and Antitrust Risk

Hassan Faghani argues that tariffs should be viewed as not only trade-policy tools but also valuable natural experiments for understanding competition and antitrust risk. Tariffs create common cost increases across competing firms and often lead to parallel pricing behavior that may be entirely consistent with competition. Yet the same conditions can make coordination easier and more difficult to detect.

Drawing on recent empirical research, the article shows that tariffs are passed largely through to importers at the border, while their effects on retail prices emerge more gradually and vary based on factors such as inventories, contracts, bargaining power, and competitive conditions. Supply chains and market structure play a key role in determining who ultimately bears tariff costs, with markups at multiple distribution stages potentially amplifying the impact on final consumer prices. Mr. Faghani argues that antitrust analysis should move beyond simple observations of price increases and instead examine tariff exposure, timing of pass-through, margins, supply-chain relationships, and firm conduct.

Mr. Faghani concludes that tariff periods create heightened antitrust risk because they reduce the informational value of price movements alone. Regulators and businesses should focus on market structure, communications, and evidence of behavior when assessing whether pricing changes reflect competition or potential coordination.