The Bank for International Settlements published a working paper that quantifies the global macroeconomic effects of the United States’ 2025 tariff policies using a multi-country, multi-sector trade model with input-output linkages and endogenous labor supply. The paper finds broad-based tariffs generate widespread short-run output losses and inflationary pressures, with the largest real-economy impacts concentrated in economies tightly integrated into US supply chains, while long-run supply-chain reallocation partially mitigates but does not eliminate these effects. The model uses the 2023 Asian Development Bank Multiregional Input-Output Table (62 economies, 35 industries aggregated to 16) and simulates tariffs announced as of 25 August 2025, including sector-specific US tariffs of 25% on transport equipment and 50% on metals, plus country-specific tariffs and retaliatory measures by China and Canada. Relative to an end-2024 tariff baseline, the paper estimates short-run real value added falls by 0.94% in the US (2.64% rise in the price level), 1.45% in Canada (0.03% fall in prices) and 1.37% in Mexico (0.84% fall in prices), with manufacturing most affected and services also contracting via input-output linkages. In the long run, US output losses narrow to 0.72% and US inflation eases to 2.50% as firms re-source, while Mexico remains materially weaker at -1.10% output with -1.00% prices. A comparison of a broad-based tariff regime versus a narrower configuration that retains China-focused and selected sector tariffs but removes generalized tariffs on other partners shows smaller global effects in the narrower case (global output -0.23% vs -0.39%, US prices 1.05% vs 2.64%) and greater trade diversion, with Vietnam moving from a -0.16% output loss to a 0.32% gain.

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