How the Fed Model Shows Tariffs Boost Growth
\n\nTariffs can boost U.S. economic growth over the long term even when foreigners absorb just a tiny fraction of their cost, according to the Federal Reserve’s main economic model.
\n\nThe Federal Reserve Board’s large-scale model, known as FRB/US, indicates that a broad 10 percent tariff on non-oil goods can leave real GDP about 0.28 percent higher after ten years if foreign producers absorb just over one percent of the total tariff bill. Business investment also ends up higher.
\n\nThat is a striking result given the mainstream economics profession’s animosity toward tariffs. Economists at the Fed have devoted enormous attention to the costs of tariffs. Yet they’ve done almost no work exploring the fact that the Fed Board’s model shows tariffs adding to growth.
\n\nWe discovered the results of the Fed’s model while investigating Harvard economist Jason Furman’s recently published simulations of “alternative histories.” These are pretty fun to play with, so we encourage you to check them out. You can see what happens under the Fed’s model if the 2009 stimulus had been larger or if the Biden administration’s American Rescue Plan had been smaller or if Putin had not invaded Ukraine.
Original source: https://www.breitbart.com/economy/
