On 3 April 2025 at 10:00, you a welcome to join a seminar on the topic „America First? The Macroeconomic Implications of Punitive Tariffs”, which will be presented by Natascha Hinterlang from Deutsche Bundesbank and is a joint work with her co-authors Anne Ernst (Deutsche Bundesbank), Marius Jäger (Deutsche Bundesbank + Albert Ludwig University of Freiburg), and Nikolai Stähler (Deutsche Bundesbank).
The seminar should take around 1 hour and 30 minutes including questions and discussions. There is also the option to dial in via MS Teams.
Abstract: Since 2018, punitive tariffs have resurged as tools for protecting national economies, particularly between the US and China. This paper examines the macroeconomic and welfare impacts of various tariff scenarios using a four-region dynamic general equilibrium model with a multi-sectoral production network. The scenarios include unilateral US tariffs, coordinated US-EU tariffs, Chinese retaliation, Europe’s non-participation, and sector-specific versus broad tariffs. Our results show that tariffs initially boost domestic output by making local goods cheaper. While consumption increases permanently, the output benefits are short-lived. Increased production costs and reduced global income negate the output gains over time. China has an incentive to retaliate and when it does so, welfare losses deepen for the affected partners. Additionally, the rest of the world suffers from reduced aggregate income regardless of direct involvement in tariff conflicts. Sector-specific tariffs are found to be less effective in terms of output than broad tariffs by failing to protect non-targeted industries. Overall, tariffs appear inefficient for economic protection due to the high possibility of retaliation.