Studies from Board of Governors Federal Reserve Describe New Findings in Investment (Tariffs and Goods-market Search Frictions*): Investment

2026 AUG 04 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Researchers detail new data in Investment. According to news reporting from Washington, District of Columbia, by NewsRx journalists, research stated, “We study tariffs in a general equilibrium dynamic model with search frictions between heterogeneous exporting producers and importing retailers. We show the model has a unique equilibrium and analytically characterize home unilateral import tariffs that maximize welfare given a passive foreign country.”

The news correspondents obtained a quote from the research from the Board of Governors Federal Reserve, “Search frictions add two terms to the standard optimal tariff expression: One lowers tariffs when contact rates are low; another when private export costs exceed social opportunity costs. Search frictions also introduce new incentives to subsidize imports due to market thickness effects. We calibrate our baseline to U.S. and Chinese 2016 data. We compare this baseline to a counterfactual with international search costs reduced to domestic levels but with all other parameters fixed.”

According to the news reporters, the research concluded: “We find that higher baseline search costs reduce optimal U.S. unilateral and Nash tariffs and attenuate welfare responses to tariff changes.”

This research has been peer-reviewed.

For more information on this research see: Tariffs and Goods-market Search Frictions*,. Journal of International Economics, 2026;162. Journal of International Economics** can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of International Economics - http://www.journals.elsevier.com/journal-of-international-economics/)

Our news journalists report that additional information may be obtained by contacting Andrew H. McCallum, Board of Governors Federal Reserve, Washington, DC 20551, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jinteco.2026.104266. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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