Events

Professor Michael Sposi
Associate Professor of Economics
Southern Methodist University

We develop a structural framework to identify the sources of cross-state heterogeneity in response to US tariff changes. A unilateral 25-percentage-point US tariff increase across sectors induces consumption changes ranging from –0:8% in Oregon to 2:1% in Montana. This variation stems from the interaction between states’ internal comparative advantage and the nation’s external comparative advantage. Factor mobility lowers aggregate consumption and reshapes the cross-state impacts by shifting resources towards more distorted states and sectors. Consequently, \preferred” tariff changes vary systematically across states, necessitating transfers to align regional policy incentives. Finally, foreign retaliation reduces aggregate gains while perpetuating cross-state variation.