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More evidence on the effects of recent tariffs

U.S. tariff rates in 2025 reached levels not seen since the Great Depression, yet imports increased, according to a new open-economy New Keynesian model that accounts for the missing trade collapse by incorporating tariff heterogeneity, inventories, and investment shocks tied to the AI-driven boom.

read1 min views1 publishedAug 21, 2026

Trump is giving economists something to write papers about: U.S. tariff rates in 2025 rose to levels not seen since the Great Depression, yet imports increased. To account for the missing trade collapse, we develop an open-economy New Keynesian model with tariff heterogeneity, inventories, and shocks to investment that capture the AI-driven boom. The model […]

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