Summary
New research indicates that the actual impact of tariffs on the U.S. economy is smaller than previously expected. Factors such as shipment lags, exemptions, and trade agreements have contributed to the effective tariff rate being lower than announced. While tariffs still affect economic conditions like unemployment, they do not seem to increase inflation in the medium term.
Key Facts
- Actual tariff rates paid by importers are lower than rates suggested by White House policy, about 14% vs. 27%.
- Shipment lags, exemptions, and trade agreements like U.S.-Mexico-Canada reduce the effective tariff rates.
- The research suggests that tariffs have historically reduced inflation over the medium term.
- Tariff impacts tend to cause lower demand and increased unemployment.
- The gap between announced and actual tariff rates could persist or widen due to more exemptions.
- Imports, particularly from Canada and Mexico, often avoid high tariffs due to trade agreement compliance.
- Research from the San Francisco Federal Reserve indicates tariffs have not been historically inflationary.
- The paper argues that, while tariffs are a tax on imports, they also create economic uncertainty.
