Staff Reports
The headline is simple and a little embarrassing for the economic gatekeepers: a public replay of the Federal Reserve Board’s FRB/US model—released by Harvard’s Jason Furman and run widely on Econvitals—shows that under reasonable assumptions a 10% tariff on non‑oil goods can raise U.S. economic growth and business investment over the long run. That’s not the Fed announcing a new tariff policy. It is, however, the Fed’s own model doing the math and contradicting the reflexive claim that tariffs are always economic poison. Keywords: FRB/US model, tariffs, Jason Furman, Econvitals, economic growth, business investment.
What Furman and Econvitals actually published
Jason Furman posted a public set of FRB/US “what if” runs that let anyone see how the Fed’s macro model behaves under different shocks. Econvitals then published a simulator and replication code so reporters and analysts could re-run those scenarios. In Furman’s tariff run, he changed one part of the model—the investment‑price relationship—because he thought the standard channel gave an implausible boost to investment when selling prices rose. With that tweak, his run showed lower long‑run GDP and weaker investment. But when the standard FRB/US investment rule is left in place and foreign suppliers are allowed to absorb a tiny sliver of the duty on capital goods, the same model yields a small but positive gain in ten‑year GDP and investment.
Why a tiny modeling choice flips the result
The key is simple: businesses look at what new machines cost and what they can sell. If tariffs make selling prices rise more than the cost of capital, investment can become more attractive. Furman’s version shut that channel down; the Econvitals re‑run restored it. Add the realistic possibility that foreign suppliers shave their pre‑tariff prices by a hair on capital goods and the sign of the effect flips. These are technical choices, but they matter. The reported gains are small—tenths of a percent of GDP—yet that still equals many billions of dollars over time. And yes, these runs do not model retaliation, complex supply chains, or firm‑level winners and losers, so they are not a final word.
Policy takeaway — stop treating tariffs like a cursed relic
Conservative readers should note the obvious: even the Fed’s own work, when run a different way, vindicates the basic conservative case for using trade tools to rebuild industry. That does not mean tariffs are a magic wand. It does mean that careful policy design and honest modeling can show net gains, not just losses. If the mainstream keeps insisting tariffs only shrink the pie, they either aren’t reading the Fed model or they’re choosing not to. Either way, policymakers should pay attention to model assumptions instead of treating models like scripture.
Bottom line
Furman’s public “what if” library and Econvitals’ simulator made a useful thing: they let anyone see how assumptions drive conclusions. The Fed’s FRB/US model can be used to argue tariffs hurt or help, depending on the knobs you turn. That should make us skeptical of confident pronouncements and hungry for more transparent debate. If the left refuses to accept that tariffs might have benefits, fine—let them explain why they prefer guessing over showing their math. Meanwhile, Washington should stop acting shocked when models say what conservative common sense has long argued: smart trade policy can strengthen American investment and growth. Call it inconvenient, call it uncomfortable, but don’t call it impossible.
