Assessing the macroeconomic impacts of the 2025 US tariffs

Hongyan Zhao

No 1316, BIS Working Papers from Bank for International Settlements

Abstract: This paper develops a multi-country, multi-sector trade model with input-output linkages to analyze the global macroeconomic effects of the United States'(US) 2025 tariff policies. The model incorporates endogenous labor supply and captures the transmission of tariff-induced shocks through global value chains (GVCs). By simulating both short-run and long-run adjustments, the analysis demonstrates how trade shocks are amplified by sectoral interdependence and labor market dynamics. The results reveal substantial short-run output losses and inflationary pressures, especially for economies deeply integrated into US supply chains, while long-run reallocations partially mitigate-but do not fully offset-these impacts.

Keywords: tariffs; global supply chains; inflation; output; trade war (search for similar items in EconPapers)
JEL-codes: C68 E31 F13 F41 (search for similar items in EconPapers)
Date: 2025-12
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