The short-run impact of US tariffs on an interconnected world

Jorge Alonso-Ortiz and José María Da-Rocha

No 2025-09, Working Papers from FEDEA

Abstract: We quantify the short-run impact of U.S. tariffs with a 77-country, 11-sector input-output model calibrated to OECD´s ICIOs. All intermediate inputs are locked in fixed Leontief proportions, so relative prices-not quantities-absorb the shock. A uniform 10% duty trims world GDP by 0.73% and U.S. GDP by 0.83%; ratcheting the schedule to 25% on NAFTA, to 15% on EU partners, and to 145% on China deepens those losses to 3.38% and 3.78%, respectively. Global trade flows in value, measured as exports plus imports over GDP, drop by 4.60% on average, but the U.S. is the biggest loser as its trade flows drop by -2.40% with a uniform duty, but drops can be as large as -11.60%.

Date: 2025-08
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