What Can History Tell Us About Tariff Shocks?

Régis Barnichon and Aayush Singh

FRBSF Economic Letter, 2026, vol. 2026, issue 01, 5

Abstract: The change in the average U.S. tariff rate in 2025 was the largest in the modern era. One way to assess the effects of such a large shock on unemployment and inflation is by looking at data from pre-World War II periods with tariff rate changes of a similar magnitude. Analysis shows that previous tariff hikes raised unemployment and reduced both economic activity and inflation. Uncertainty may be a factor behind these effects: A large tariff increase raises uncertainty, which can depress overall demand and lead to lower inflation.

Keywords: tariffs; uncertainty; monetary policy (search for similar items in EconPapers)
Date: 2026
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