The Economic Effects of Tariffs

Naomi Halbersleben, Oscar Jorda and Fernanda Nechio

FRBSF Economic Letter, 2025, vol. 2025, issue 29, 6

Abstract: The United States announced new, higher tariff rates this year. Tariffs can affect supply chains, investment, and firms’ input costs, resulting in supply-side effects such as higher inflation and higher unemployment. However, tariffs can also affect spending, the demand side of the economy. Weaker demand translates to higher unemployment but lower inflation. Estimates using 40 years of international data show that, following a change in tariffs, initially the unemployment rate increases and inflation declines. Over time, however, the unemployment rate returns to normal levels while inflation increases.

Keywords: tariffs; supply chains; investment; unemployment rates; inflation (search for similar items in EconPapers)
Date: 2025
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