U.S. tariff outcomes dependent on trading partner responses

Enrique Martínez García () and Michael Sposi

Dallas Fed Economics from Federal Reserve Bank of Dallas

Abstract: U.S. tariff policy has historically shifted among competing goals: providing revenue, protecting domestic markets and opening foreign markets to domestic producers. These goals are unlikely to be achieved simultaneously. Modern models applied to the U.S. reveal that tariffs can enhance consumer welfare via terms-of-trade gains, a costly externality on foreign partners, but only if those partners don’t retaliate. Thus, potential consumption gains for U.S. households and businesses depend on policy choices and strategic responses from trading partners.

Keywords: manufacturing; Mexico; tariffs; trade (search for similar items in EconPapers)
Date: 2025-05-13
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Persistent link: https://EconPapers.repec.org/RePEc:fip:d00001:99961

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