The Macroeconomic Effects of Tariffs: Insights from 180 Years of U.S. Trade Policy

We study the macroeconomic effects of tariff policy using U.S. historical data from 1840-2024.We construct a narrative series of plausibly exogenous tariff changes -based on major legislative actions, multilateral negotiations, and temporary surcharges -and use it as an instrument to identify a structural tariff shock.Tariff increases are contractionary: imports fall sharply, exports decline with a lag, and output and manufacturing activity drop persistently.The shock transmits through both supply and demand channels.Prices rise in the full sample but fall post-World War II, a pattern consistent with changes in the monetary policy response and with stronger international retaliation and reciprocity in the modern trade regime.