Labor Market Responses to Tariffs: Frictions, Dynamics, and Policy Responses

Rafael Dix-Carneiro and Brian Kovak

Journal of Economic Perspectives, 2026, vol. 40, issue 3, 73-100

Abstract: This article introduces the evidence and associated modeling frameworks contemporary economists use to understand the effects of trade and trade policy on labor markets, with a particular emphasis on labor-market frictions and adjustment dynamics. The effects of trade shocks differ across industries, regions, and occupations, implying the presence of important adjustment frictions in labor markets, and these effects evolve slowly over time, implying the need for dynamic frameworks rationalizing slow transitions. After reviewing the key insights from this literature, we discuss policies aimed at mitigating costs to workers and ensuring that the gains from trade are shared more equitably.

JEL-codes: D72 F13 F14 F16 F66 R23 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/jep.20251489

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