The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty

The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty
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Volume/Issue: Volume 2024 Issue 013
Publication date: January 2024
ISBN: 9798400265143
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Summary

We estimate the macroeconomic effects of import tariffs and trade policy uncertainty in the United States, combining theory-consistent and narrative sign restrictions in Bayesian SVARs. We find mostly adverse consequences of protectionism, in aggregate and across sectors and regions. Tariff shocks are more important than trade policy uncertainty shocks. Tariff shocks depress trade, investment, and output persistently. The general equilibrium import elasticity is –0.8. Historically, NAFTA/WTO raised output by 1-3% for twenty years. Undoing the 2018/19 measures would raise output by 4% over three years. The findings imply higher gains of trade than partial equilibrium or static trade models.