Tariffs as Taxes on Capital

Rubén Domínguez-Díaz (), Marta Domínguez-Jiménez (), José-Elías Gallegos () and Javier Quintana ()
Additional contact information
Rubén Domínguez-Díaz: Banco de España, https://www.bde.es/
Marta Domínguez-Jiménez: CEMFI, Centro de Estudios Monetarios y Financieros, https://www.cemfi.es/
José-Elías Gallegos: Banco de España, https://www.bde.es/
Javier Quintana: Banco de España, https://www.bde.es/

Working Papers from CEMFI

Abstract: This paper explores the macroeconomic consequences of levying tariffs on imported investment goods, which directly affect the household’s investment Euler equation. First, we construct a new multi-country and multi-sector investment input-output matrix to trace investment goods through international production chains. Second, we embed this in an open-economy New Keynesian model with production networks. In a uniform US tariff experiment, this channel more than doubles the impact contraction in GDP, with investment-goods exposure as the best predictor of aggregate output losses. Holding the average tariff fixed, redesigning its composition to avoid the investment network cuts cumulative domestic output losses by two-thirds.

Keywords: Tariffs; capital accumulation; investment goods; production networks; sectoral incidence. (search for similar items in EconPapers)
JEL-codes: E22 E31 E32 F41 F44 (search for similar items in EconPapers)
Date: 2026-07
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2026_2610

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