By Gloria Ogbonna
A new economic study is making headlines and quickly becoming a favorite citation among critics of tariffs. Published as a working paper through the National Bureau of Economic Research (NBER), the report argues that tariff increases historically reduce trade, weaken manufacturing, and slow overall economic growth.
Supporters of free trade are pointing to the paper as powerful proof that tariffs harm the domestic economy.
But a closer reading suggests the conclusions may not be as definitive as some are claiming.
The study, written by economists Tamar den Besten and Diego R. Känzig, attempts to examine the long-term economic effects of tariffs in the United States by analyzing major tariff changes from 1840 through 2024.
Instead of focusing on one specific administration or policy, the authors compiled a sweeping historical dataset to identify how tariff increases—or decreases—correlated with economic performance over time.
Unlike shorter-term analyses that focus on a single presidency, this study aims to provide a broader perspective, examining nearly two centuries of economic history.
Because of this scope, the paper is being presented by some commentators as one of the strongest empirical cases yet against tariff-based trade policy.
However, critics of the study argue that its conclusions may be overstated—and that its dataset contains important limitations that affect how its findings should be interpreted.
One of the most significant issues lies in the number and type of tariff increases included in the analysis. Out of 35 major tariff events identified between 1840 and 2024, only 21 were classified as “exogenous,” meaning they were not direct responses to recessions, fiscal crises, or external imbalances.
In the modern, post-World War II period, most of those so-called “clean” events were not tariff increases at all—but tariff reductions. These included multiple rounds of trade liberalization under global agreements that lowered tariffs across many industries.
In fact, only two modern tariff increases met the authors’ criteria: the tariffs imposed during 2018 and 2019.
That creates a challenge for drawing broad conclusions about the effects of tariff hikes in today’s economy. Instead of relying on a large number of modern tariff increases, the study’s conclusions about tariff hikes are based largely on extrapolations from tariff cuts.
In other words, the study assumes that tariff increases have effects that mirror tariff reductions—but in reverse.
This type of assumption is common in economic modeling, but it is not the same as directly observing multiple real-world examples of tariff increases. Without a large number of modern tariff hikes to analyze, the conclusions rely heavily on statistical inference rather than extensive contemporary evidence.
Another limitation is that the study does not closely examine the modern tariff increases individually. The tariffs introduced in 2018 and 2019 are included in the dataset, but they are blended into the overall results rather than analyzed separately to see whether their real-world effects matched the model’s predictions.
This matters because recent economic data does not always align neatly with the study’s conclusions.
For example, during 2018, when tariffs were introduced on steel, aluminum, and certain imports from China, the U.S. economy continued to grow. GDP remained strong, business investment increased, and industrial production expanded.
Imports continued rising, and while exports slowed somewhat later in the year, there was no immediate or dramatic collapse.
In 2019, after tariffs were expanded, economic growth slowed modestly but remained positive. Manufacturing showed some weakness, but overall investment and consumer spending continued to support the economy.
More recent tariff actions in the mid-2020s also produced mixed results. While imports declined in some periods, other indicators—including domestic production and investment—remained stable or grew.
These mixed outcomes suggest that the relationship between tariffs and economic performance may be more complex than a simple cause-and-effect model suggests.
Even the authors of the study acknowledge that tariff effects can vary depending on the broader economic environment. Factors such as monetary policy, currency movements, global demand, and foreign retaliation can all influence how tariffs affect the economy.
In some cases, tariffs may trigger retaliation that reduces exports. In others, they may encourage domestic production or investment in local industries.
The global trade environment itself has also evolved significantly over time. The economic structure of the United States today is very different from what it was in the 19th or early 20th centuries, making historical comparisons more complicated.
This raises an important point: averages drawn from long periods of history may not always reflect how modern policies operate under current conditions.
Ultimately, the new NBER paper provides a valuable contribution to the ongoing debate over tariffs and trade policy. It offers a long-term perspective and presents evidence that tariffs have often been associated with slower economic growth.
At the same time, the study’s limited number of modern tariff increases, reliance on assumptions about symmetry, and lack of detailed analysis of recent tariff episodes mean its conclusions may not settle the debate.
The economic effects of tariffs remain a subject of intense disagreement among economists, policymakers, and political leaders. Some view tariffs as harmful barriers to trade, while others see them as tools for protecting domestic industries and strengthening national economic independence.
As new research continues to emerge, the discussion over tariffs—and their true impact on the American economy—is likely to remain far from resolved.
Source Breitbart
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