Trade Policy and Structural Change

Hayato Kato, Kensuke Suzuki and Motoaki Takahashi

Papers from arXiv.org

Abstract: We study how tariffs affect industrial structure and welfare in an economy where sectors are complements and preferences are nonhomothetic -- two drivers of structural change. Import tariffs on a sector influence sectoral composition by affecting its price relative to other sectors and national income, as well as the sector's net exports. 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 would have raised the manufacturing value-added share by one percentage point and increased welfare by 0.41 percent. If trading partners retaliated, welfare would have fallen.

Date: 2025-08, Revised 2025-11
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http://arxiv.org/pdf/2508.01360 Latest version (application/pdf)

Related works:
Working Paper: Trade Policy and Structural Change (2025)
Working Paper: Trade Policy and Structural Change (2025)
Working Paper: Trade Policy and Structural Change (2025)
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