Trade Policy and Structural Change

Hayato Kato, Kensuke Suzuki () and Motoaki Takahashi ()
Additional contact information
Kensuke Suzuki: Department of Economics, Clark University; Economic Research Center, Nagoya University.
Motoaki Takahashi: Graduate School of Economics, the University of Osaka.

No 25-07, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: We examine how tariffs affect sectoral composition and welfare in an economy with nonhomothetic preferences and sectors being complements—key drivers of structural change. Beyond their conventional role in trade protection, tariffs influence industrial structure by altering relative prices and income levels. We qualitatively characterize these mechanisms and use a quantitative dynamic model to show that a counterfactual 20-percentage-point increase in U.S. manufacturing tariffs since 2001 would have raised the manufacturing value-added share by one percentage point and increased welfare by 0.36 percent. However, if all the U.S. trading partners responded reciprocally, U.S. welfare would have declined by 0.12 percent.

Keywords: Ricardian model of trade; Structural transformation; Nonhomothetic preferences; Capital accumulation; Trade war (search for similar items in EconPapers)
JEL-codes: F11 F13 O41 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2025-08
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Related works:
Working Paper: Trade Policy and Structural Change (2025)
Working Paper: Trade Policy and Structural Change (2025)
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