Tariffs can be stagflationary in a global general equilibrium setting. The net impact of tariffs on inflation, employment, and the US dollar depends on the policy response of all countries in the trade war, from @kalemli-ozcan.bsky.social, Soylu, and Yildirim https://www.nber.org/papers/w33686

Our new paper builds a NKOE model to study interaction of monetary policy and trade frictions. Tariffs act as demand and supply shocks and lead to endogenous changes in global networks. Their impact depends on monetary policy's endogenous response both in tariff-putting and tariff-imposed countries.

Liberation Day Tariffs+Retalation can lead to a decline of ↓ 1.6 pp in US output, an increase of ↑ 0.8 pp in US inflation and also a USD NEER Appreciation of 4.8%.

Tariff-Threats that are later reversed and not implemented are self-defeating, leading to a 4.1\% appreciation of the USD, 0.6pp deflation, a 0.7 pp decline in output. US. Dollar appreciates less or can even depreciate under tariff threats, and increased global uncertainty due to these threats.

In a new paper, we build a new NKOE global network model and decompose the impact of tariffs on inflation, output, and exchange rate into channels of demand, supply, monetary policy, sectoral nominal rigidities, inflation-exchange rate expectations and global I-O linkages channels.