Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334941 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3081
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
What are the macroeconomic impacts of tariffs on final goods versus intermediate inputs? We set up a two-region, multi-sector model with production networks, sticky prices and wages, and trade in consumption, investment, and intermediate goods. We show that import tariffs on final goods have a smaller negative impact on GDP compared to tariffs on intermediate inputs, as final goods can be more readily substituted with domestic alternatives. In contrast, tariffs on intermediate inputs lead to larger GDP losses, given the limited substitutability of foreign inputs and their role in global supply chains. Moreover, inflation persistence is lower under tariffs on final goods, whereas tariffs on intermediate goods amplify cost pressures through production linkages. The results imply that a revenue-equivalent approach to import tariffs, targeting only final goods, can cushion the adverse effects of trade wars.
Subjects: 
Tariffs
Production Networks
Inflation
customs duties
supply chain
economic consequence
trade policy
national production
JEL: 
E31
E32
F12
F13
F41
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7388-5
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.