Author Archives: Menzie Chinn

US Tariff Levels Now at Emerging Market Levels

The following graph compares average tariff levels across countries.

One can take comfort from the fact US tariff rates are historically low.

I have two observations:


  • We live in an era of global value chains, so that the value added has been chopped up and split across nations. In this context, a tariff of 10% on final value is a lot more than 10% on value added.
  • This shock to global value chains comes on the back of an already stretched logistics network.

The latter point is highlighted by the following graph:

The latter is perhaps a temporary phenomenon, likely to end when the economy goes into recession. However, the former is likely more persistent.

Global value chains have been built up over decades; rejiggering these chains to accommodate tariffs of indefinite duration is sure to be disruptive, possibly inflationary (although that depends on monetary policy).

Does the Fed Care about the Rest-of-the-World?

That’s a title I borrowed from a paper by Barry Eichengreen; the actual title is “International environment and US monetary policy: a textual analysis” written by Laurent Ferrara and Charles-Emmanuel Teuf:

What role does the international environment play in shaping US monetary policy decisions? To measure its influence, we construct an international indicator extracted from minutes of Fed monetary policy committee meetings.

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