What Is a Tariff Shock? Insights from 150 years of Tariff Policy

Régis Barnichon and Aayush Singh

No 2025-26, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: In this paper we exploit 150 years of tariff policy in the US and abroad to estimate the short-run effects of tariff shocks on macro aggregates. A careful review of the major changes in US tariff policy since 1870 shows no systematic relation between the state of the cycle and the direction of the tariff changes, as partisan differences on the effects and desirability of tariffs led to opposite policy responses to similar economic conditions. Exploiting this quasi-random nature of tariff variations, we find that a tariff hike raises unemployment (lowers economic activity) and lowers inflation. Using only tariff changes driven by long-run considerations—a traditional narrative identification—gives similar results. We also obtain similar results if we restrict the sample to the modern post World War II period or if we use independent variation from other countries (France and the UK). These findings point towards tariff shocks acting through an aggregate demand channel.

Keywords: tariff; inflation; unemployment; narrative approach; political (search for similar items in EconPapers)
JEL-codes: E31 E52 F13 F41 N10 (search for similar items in EconPapers)
Pages: 25
Date: 2025-11-05
New Economics Papers: this item is included in nep-ifn and nep-inv
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DOI: 10.24148/wp2025-26

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