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.

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 … The post More evidence on the effects of recent tariffs https://marginalrevolution.com/marginalrevolution/2026/08/more-evidence-on-the-effects-of-recent-tariffs.html appeared first on Marginal REVOLUTION https://marginalrevolution.com .