Could Tariffs Provide a Stimulus? In Search of Elusive Benefits of Protectionism

Thu, 01 Jan 2026 22:55:34 +0000

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.

Tariff Pass-through at the Dock and at the Store

Sat, 01 Oct 2022 22:55:34 +0000

In this paper, I study why U.S. tariffs during the U.S.-China trade war were passed through strongly to import prices at the dock but only weakly to consumer prices at the store. The project examines how pricing frictions and strategic interactions between producers and retailers shape the transmission of trade policy shocks across the supply chain. Open access here.

Built a multi-country model with retail sectors to study tariff pass-through at both the import and consumer price levels.
Modeled nominal frictions faced by upstream producers and downstream retailers to explain why tariffs affect prices differently across stages of the supply chain.
Introduced strategic pricing complementarities between vertically related firms, where tariff-induced increases in retail prices incentivize upstream producers to raise their own prices.
Showed that producer-retailer pricing interactions amplify tariff pass-through at the dock while limiting pass-through to final consumer prices.
Used the model to reconcile the observed pattern of high tariff pass-through into import prices and low pass-through into store-level prices during the U.S.-China trade war.
Contributed to the literature on trade policy, price rigidity, and international macroeconomics by showing how vertical pricing relationships shape the real effects of tariffs.

General Equilibrium Model on Jeremy Meng

Could Tariffs Provide a Stimulus? In Search of Elusive Benefits of Protectionism

Tariff Pass-through at the Dock and at the Store