Trump is giving economists something to write papers about.

U.S. tariff rates in 2025 rose to levels not seen since the Great Depression, yet imports increased. To explain the missing trade collapse, the authors develop an open-economy New Keynesian model with tariff heterogeneity, inventories, and shocks to investment that capture the AI-driven boom. The model matches the untargeted paths of imports, output, and inflation, and is then used to decompose the effects of tariffs and the investment boom.

According to the paper, absent the investment boom, imports would have fallen by 10 percent and activity would have contracted by 0.7 percent. The effects of tariffs depend on which goods are tariffed: tariffs on consumption goods and intermediates act like shocks to supply, while tariffs on capital goods act like shocks to demand. That distinction matters for reading the 2025 data, because the concentration of tariff increases on consumption goods, along with the relative sparing of capital goods, limited the damage to output while amplifying the inflationary impulse. In other words, the same headline tariff shock can look different in the macro data depending on where it lands in the supply chain and how much firms are still buying for investment.

That is from a new NBER working paper by Francesco Ferrante, Andrea Prestipino, Andrea Raffo, and Michael E. Waugh.