A study co-authored by SMU Associate Professor of Finance Clemens Otto and another academic aimed to understand how changes in tariffs impact United States (US) manufacturing firms' investment patterns, focusing particularly on tariff reductions in supplier industries. They found that protectionist tariff policies, similar to those proposed by Donald Trump, may actually harm US manufacturing firms by discouraging investment. The study found that lowering tariffs encourages U.S. manufacturing firms using these imported goods as production inputs to boost their investments. Their findings also suggest that high import tariffs can be particularly harmful when applied to industries at the early stages of the production chain, such as Trump’s tariffs on steel and aluminium.
