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Assessing the macroeconomic impacts of the 2025 US tariffs

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  • Hongyan Zhao

Abstract

This paper develops a multi-country, multi-sector trade model with input-output linkages to analyze the global macroeconomic effects of the United States'(US) 2025 tariff policies. The model incorporates endogenous labor supply and captures the transmission of tariff-induced shocks through global value chains (GVCs). By simulating both short-run and long-run adjustments, the analysis demonstrates how trade shocks are amplified by sectoral interdependence and labor market dynamics. The results reveal substantial short-run output losses and inflationary pressures, especially for economies deeply integrated into US supply chains, while long-run reallocations partially mitigate-but do not fully offset-these impacts.

Suggested Citation

  • Hongyan Zhao, 2025. "Assessing the macroeconomic impacts of the 2025 US tariffs," BIS Working Papers 1316, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1316
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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