No. 965 - An examination of the domestic macroeconomic consequences of the United States' trade policies

by Luisa Carpinelli and Sergio Santoro
September 2025
Vai alla versione italiana Site Search

In 2018-19, the US imposed tariffs on approximately 18 per cent of imports, mainly from China, raising the effective tariff rate vis-à-vis the latter from 3 to 11 per cent. This paper studies the transmission of those tariff increases to the US economy and, based on this evidence, explores the possible macroeconomic implications of the 2025 trade war.

In 2018-19, tariffs were passed on almost entirely to import prices. They did not generate the expected manufacturing and employment growth, or reduce the overall US trade deficit, as trade flows from China were replaced by imports from other countries. The 2025 tariff hikes are larger in scale and affect many more partners and products, making it likely that price increases will partly be absorbed by foreign exporters, and that the reduced diversification options available to US importers will make the effects on the trade balance more visible.

Full text

  1. 17 September 2025
    No. 965 - An examination of the domestic macroeconomic consequences of the United States' trade policies
    PDF 11 MB

Sezione di approfondimento