Research conducted by Frankfurt School of Finance & Management indicates that protectionist tariff policies, while aimed at boosting local manufacturing, may discourage investment by U.S. firms.
Specifically, the study suggested that a 10% reduction in upstream tariffs on imports can lead to a 4-6% increase in investments further down the production chain, highlighting the cascading benefits of lower input costs.
Analyzing historical U.S. import data, the researchers concluded that increasing tariffs would likely lead to reduced manufacturing investments, especially affecting the procurement of raw materials.
The researchers emphasized the positive link between lower tariffs and higher manufacturing investments, asserting that raising tariffs could inadvertently stifle growth in the U.S. manufacturing sector.
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