Trade Policy and Structural Change

Hayato Kato, Kensuke Suzuki and Motoaki Takahashi

No 772, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

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: Tariff; Ricardian model of trade; Structural transformation; Nonhomothetic preferences; Capital accumulation; Trade war (search for similar items in EconPapers)
JEL-codes: F11 G13 O41 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2025-08
New Economics Papers: this item is included in nep-int
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https://hit-u.repo.nii.ac.jp/record/2061015/files/DP772.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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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:772

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