In this paper, I study whether tariffs can stimulate the domestic economy by raising demand for domestic goods. The project examines a central policy question in international macroeconomics: can protectionist trade policy increase output and employment, or do higher prices and distortions outweigh any expansionary effects? Open access here.

• Built a structural macroeconomic model to study how tariffs affect domestic prices, import demand, production, and welfare.
• Modeled the pricing decisions of producers and retailers to examine how tariff costs pass through from imported inputs and final goods to consumer prices.
• Compared the potential stimulus effect from import substitution with the negative effects of higher prices, reduced purchasing power, and lower consumer welfare.
• Studied how tariff pass-through depends on market structure, supply chain exposure, and the ability of firms to absorb or transmit cost increases.
• Used model-based counterfactuals to evaluate whether tariffs can generate aggregate demand effects similar to fiscal stimulus.
• Showed that tariffs may shift spending toward domestic producers in some settings, but they also create price distortions and welfare losses that limit their effectiveness as a stimulus tool.