Jeffrey Miron
A recent study points out the dearth of historical research on the macroeconomic effects of tariffs, especially as a tool to analyze modern-day tariffs. The study
addressed this challenge by analyzing all major US tariff rate changes from 1840 to 2024. Drawing on historical research, congressional records, and statutes, we identified … 21 tariff rate changes, which we used to examine the macroeconomic effects of tariffs.
These examples
reveal that increasing tariff rates contracted the US economy. … [T]ariff increases did not shield domestic industry despite their protective intent. Additionally, trade contracted markedly.
While tariffs might be expected to cause large price increases,
[o]verall prices increased [only] by around 0.5 percent at their peak. … [T]he simultaneous presence of supply-side inflationary pressures and demand-side pressures that slowed price growth could explain the muted overall change in aggregate prices.
To sum up, the
research indicates that tariff increases reduce domestic output and trade. While tariffs may protect some domestic industries, they ultimately reduce aggregate output, manufacturing activity, and the global competitiveness of US goods.
Cross-posted from Substack.
