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What Can History Tell Us About Tariff Shocks?

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Abstract

The change in the average U.S. tariff rate in 2025 was the largest in the modern era. One way to assess the effects of such a large shock on unemployment and inflation is by looking at data from pre-World War II periods with tariff rate changes of a similar magnitude. Analysis shows that previous tariff hikes raised unemployment and reduced both economic activity and inflation. Uncertainty may be a factor behind these effects: A large tariff increase raises uncertainty, which can depress overall demand and lead to lower inflation.

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  • Régis Barnichon & Aayush Singh, 2026. "What Can History Tell Us About Tariff Shocks?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2026(01), pages 1-5, January.
    • Handle: RePEc:fip:fedfel:102299
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    1. Andrés Rodríguez-Clare & Mauricio Ulate & Jose P. Vasquez, 2025. "The 2025 Trade War: Dynamic Impacts Across U.S. States and the Global Economy," NBER Working Papers 33792, National Bureau of Economic Research, Inc.
    2. Stephanie Schmitt-Grohé & Martín Uribe, 2025. "Transitory and Permanent Import Tariff Shocks in the United States: An Empirical Investigation," NBER Working Papers 33997, National Bureau of Economic Research, Inc.
    3. Iván Werning & Guido Lorenzoni & Veronica Guerrieri, 2025. "Tariffs as Cost-Push Shocks: Implications for Optimal Monetary Policy," NBER Working Papers 33772, National Bureau of Economic Research, Inc.
    4. Régis Barnichon & Aayush Singh, 2025. "What Is a Tariff Shock? Insights from 150 years of Tariff Policy," Working Paper Series 2025-26, Federal Reserve Bank of San Francisco.
    5. Bergin, Paul R. & Corsetti, Giancarlo, 2023. "The macroeconomic stabilization of tariff shocks: What is the optimal monetary response?," Journal of International Economics, Elsevier, vol. 143(C).
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    1. Thiago Revil T. Ferreira & Michele Modugno & Berardino Palazzo & Carlos Ramírez, 2026. "Disruptions to Foreign Trade and U.S. Banks’ Returns," Finance and Economics Discussion Series 2026-013, Board of Governors of the Federal Reserve System (U.S.).

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