{"id":1466,"date":"2025-03-20T15:13:06","date_gmt":"2025-03-20T15:13:06","guid":{"rendered":"https:\/\/blogs.mathworks.com\/finance\/?p=1466"},"modified":"2025-03-20T16:27:25","modified_gmt":"2025-03-20T16:27:25","slug":"the-economic-effects-of-tariff-changes","status":"publish","type":"post","link":"https:\/\/blogs.mathworks.com\/finance\/2025\/03\/20\/the-economic-effects-of-tariff-changes\/","title":{"rendered":"The Economic Effects of Tariff Changes"},"content":{"rendered":"

The following post is from Yuchen Dong<\/a>, Senior Financial Application Engineer.<\/em><\/p>\n

The code presented in this blog can be found here<\/a>.<\/em><\/p>\n

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This example demonstrates a practical tool for modeling the economic effects of tariff changes. We run simulations of hypothetical tariff changes using illustrative data inputs. Suppose there are three imported products, and the tariffs increase to different levels: 20%, 15%, and 10%. We apply the Multi-step Euler method to a non-linear model. Due to domestic substitution products, the price and quantity of imported products decrease, while the revenue of domestic products increases. Consequently, the Consumer Price Index (CPI) rises due to the impact of the tariffs. <\/span>In this example, we implement a non-linear C<\/span>onstant E<\/span>lasticity of S<\/span>ubstitution (CES) Tariff model.<\/div>\n

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The CES demand curve for products from source country j<\/span>: <\/span>,<\/div>\n<\/div>\n<\/div>\n
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where:<\/div>\n