How do tariffs impact the US economy?

Sujan Bandyopadhyay, Domenico Ferraro and Lorenzo Octavio Vera Bower

Economics Letters, 2025, vol. 254, issue C

Abstract: This letter presents new empirical evidence on the economic impact of tariffs on the US economy using structural vector autoregressions (SVARs). A persistent increase in tariffs on imports from the rest of the world reduces real GDP growth, permanently lowering real GDP relative to the trend before the tariff increase. The magnitudes are broadly consistent with available estimates of the negative impact of increases in average personal income tax rates. The contraction in economic activity is associated with a decrease in stock market capitalization. The federal deficit in percent of GDP worsens. Inflation increases initially, but then falls below average for a few years, implying a negligible effect on the price level.

Keywords: Tariffs; Growth; Interest rates; Inflation; Stock market; Monetary policy (search for similar items in EconPapers)
JEL-codes: E3 F1 F4 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176525002435
Full text for ScienceDirect subscribers only

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:eee:ecolet:v:254:y:2025:i:c:s0165176525002435

DOI: 10.1016/j.econlet.2025.112406

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().