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Trade Tariffs: Difference between revisions
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== Consequences of Trade Tariffs == | == Consequences of Trade Tariffs == | ||
* Results suggest that tariff increases have an adverse impact on output and productivity; these effects are economically and statistically significant. They are magnified when tariffs are used during expansions, for advanced economies, and when tariffs go up.<ref>https://www.imf.org/-/media/Files/Publications/WP/2019/wp1909.ashx</ref> | |||
* Higher tariffs lead to an increase in inflation after two years. Furthermore, the effect on inflation is stronger during economic expansions than in recessions because of central banks respond with a contractionary impulse. | |||
* Tariff increases lead to more unemployment and higher inequality, further adding to the deadweight losses of tariffs. | |||
* Tariffs have only small effects on the trade balance though, in part because they induce offsetting exchange rate appreciations. | |||
* Protectionism also leads to a decline in consumption; this, together with our other findings, suggests that tariffs are bad for welfare. | |||
== Developments == | == Developments == | ||