Tariffs in 2025: Short-Run Impacts on the U.S. Economy

Pablo D. Fajgelbaum and Amit Khandelwal

No 35064, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In 2025, the U.S. raised average tariff duties from 2.4% to 9.6%, bringing protectionism to its highest level in eighty years. We explore the structure of these tariffs, estimate their short-run impacts, and summarize the growing literature on their effects. Across trade partners, the tariffs are correlated with trade deficits but not with geopolitical or strategic industrial goals, other than targeting China. In our baseline estimate, 90% of the tariffs are passed through to tariff-inclusive prices paid by U.S. importers. Incorporating the estimated price and trade responses into a static trade framework, we find an overall welfare impact ranging from a loss of 0.13% of GDP to a gain of 0.10%. These small net welfare impacts reflect sizable consumption losses roughly offset by income and revenue gains, with their sign hinging on whether U.S. terms-of-trade adjusted (on which the data are inconclusive). Among their stated rationales, the tariffs have been effective at raising federal revenue and diverting trade from China. However, it remains uncertain whether they will reduce the trade deficit, lower prices set by foreign exporters, promote manufacturing jobs, increase “friend-shoring” among aligned countries, or reshore key sectors; evidence from 2018-19 and 2025 indicators suggests a narrow path towards achieving these goals.

JEL-codes: F01 (search for similar items in EconPapers)
Date: 2026-04
New Economics Papers: this item is included in nep-cna
Note: ITI
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w35064.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:35064

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w35064
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().