Tariffs do not improve trade balance
News
Import & export
About trade
Published: 10 Mar 2025
A new empirical study shows that higher tariffs are not an effective way to reduce a country's trade deficit.
The analysis, covering 168 countries between 2019 and 2022, finds that tariffs have no impact on the trade balance in OECD countries. In developing nations, however, they are associated with larger deficits.
Factors such as budget deficits, private savings, and capital flows have a significantly greater impact on the trade balance than tariffs. For the US, for example, strengthening public finances and encouraging overseas investment would be more effective in reducing the trade deficit than raising tariffs.
Read the full analysis