This paper estimates the relationship between the U.S. tariff increases of 2018-2019 and outcomes in domestic manufacturing. Despite being intended to boost manufacturing activity, we find U.S. industries more exposed to tariff increases experience relative reductions in employment, as a small positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices due to rising input costs. Lastly, we document broader labor market impacts, as counties more exposed to rising tariffs exhibit relative increases in unemployment and declines in labor force participation.

Using novel firm-level microdata and leveraging a natural experiment, this paper provides causal evidence for the role of trade and multinational firms in the cross-country transmission of shocks. The scope for trade linkages to generate cross-country spillovers depends on the elasticity of substitution with respect to domestic inputs. Using the 2011 Tōhoku earthquake as an exogenous shock, we structurally estimate production elasticities at the firm level and find greater complementarities in input usage than previously thought. For Japanese affiliates in the United States, output falls roughly one-for-one with declines in imports, consistent with a relationship between imported and domestic inputs that is close to Leontief.