Heterogeneous price responses to trade policy uncertainty: Evidence from income-specific CPIs

This paper examines the heterogeneous effects of trade policy uncertainty (TPU) on consumer prices across the income distribution. Using income-specific CPI data and a TPU shock measure derived from monthly tariff rates, I estimate impulse responses via local projections. The results show that prices faced by top-income households rise more strongly in response to TPU shocks than those faced by low-income households. These findings suggest that uncertainty-induced demand effect is more pronounced among low-income households, highlighting the importance of accounting for heterogeneity when assessing the macroeconomic implications of TPU. • Trade policy uncertainty shocks are identified using tariff rate volatility. • Income-specific CPI data reveal heterogeneous inflation responses to TPU. • Prices for top-income households rise more than for low-income households. • TPU shocks differ from macro uncertainty, causing price increases over time.