out. If imposed on imports in upstream sectors, import tariffs lower domestic output in downstream sectors; if imposed … downstream, they raise upstream production. The aggregate effect of tariffs can be recessionary or expansionary—depending on the … strength of upstream and downstream effects. Tariffs raise inflation no matter what, but how persistently they do so also …

infinite future. In this paper I analyze the setting of tariffs in a two-country model taking account of adjustment processes … induces policy makers with a short planning horizon to set lower tariffs because it enhances the short run boom following a … cut in tariffs. Monetary policy that aggressively fights deviations from its inflation target leads to even lower tariffs. …