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The Welfare Effects of Trump’s Tariff Policy

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  • Todorova, Tamara

Abstract

We discuss the terms-of-trade effects of the import tariffs imposed by the US administration. Import tariffs benefit a large nation by suppressing the export price of the good it imports and by improving its terms of trade. This allows the large nation to move to a higher consumption point without the need for actual economic growth. The terms-of-trade gain is substantive for a large nation, while there is none for a small open economy. Borrowing on international trade theory we argue that the purpose of the import tariffs imposed by the USA is not merely to resolve trade balance issues, but rather to effortlessly improve the consumption position of the country.

Suggested Citation

  • Todorova, Tamara, 2025. "The Welfare Effects of Trump’s Tariff Policy," MPRA Paper 127575, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127575
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    References listed on IDEAS

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    1. anonymous, 1981. "International economic situation and outlook," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 44, january/f.
    2. Todorova, Tamara, 2010. "World Demand as a Determinant of Immiserizing Growth," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 2(3), pages 255-267.
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    4. Jagdish Bhagwati, 1958. "Immiserizing Growth: A Geometrical Note," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(3), pages 201-205.
    5. Tamara TODOROVA, 2022. "Foreign Trade and Macroeconomic Effects of Exports," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 13(1), pages 31-43.
    6. anonymous, 1981. "International economic situation and developments," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 44, August.
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    Keywords

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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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