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The Economic Effects of Tariffs

Author

Listed:
  • Naomi Halbersleben
  • Òscar Jordà
  • Fernanda Nechio

Abstract

The United States announced new, higher tariff rates this year. Tariffs can affect supply chains, investment, and firms’ input costs, resulting in supply-side effects such as higher inflation and higher unemployment. However, tariffs can also affect spending, the demand side of the economy. Weaker demand translates to higher unemployment but lower inflation. Estimates using 40 years of international data show that, following a change in tariffs, initially the unemployment rate increases and inflation declines. Over time, however, the unemployment rate returns to normal levels while inflation increases.

Suggested Citation

  • Naomi Halbersleben & Òscar Jordà & Fernanda Nechio, 2025. "The Economic Effects of Tariffs," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2025(29), pages 1-6, November.
    • Handle: RePEc:fip:fedfel:102147
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    File URL: https://www.frbsf.org/research-and-insights/publications/economic-letter/2025/11/economic-effects-of-tariffs/
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    References listed on IDEAS

    as
    1. Caroline M. Paulson & Aditi Poduri & Aayush Singh & Mauricio Ulate, 2025. "The Economic Implications of Tariff Increases," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2025(16), pages 1-5, July.
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