ABSTRACT Recent trade policy developments have renewed concerns about the vulnerability of agri‐food markets to tariff increases. This paper quantifies the effects of 2025 US tariff hikes and potential tit‐for‐tat retaliation on agri‐food trade, prices, output, and welfare. We employ a sectoral general‐equilibrium gravity model covering 46 agri‐food industries on a 2023 baseline. The framework combines product‐level trade elasticities with sector‐specific supply elasticities based on input‐cost shares, providing a transparent mapping from tariffs to equilibrium outcomes. We simulate the April 2, 2025 (‘Liberation Day’) tariff schedule and the July 31, 2025 revisions, each with and without symmetric retaliation by all trading partners. Without retaliation, US agri‐food exports fall by 22%–25%, output declines by about 3%, the price index rises by 6.8%–7.2%, and welfare falls by 4.4%–4.9%. With retaliation, export losses deepen to 37%–43%, output drops by 4%–5%, the price index rises by 2%–5%, and welfare declines by 6.9%–7.9%. Welfare losses are highly asymmetric: Canada and Mexico experience the largest additional losses under retaliation, reflecting integrated North American supply chains, while contractions are concentrated in processed meats, soybeans, corn, and selected food products. Retaliation amplifies global welfare losses rather than offsetting them, suggesting that cooperative policy restraint yields smaller welfare costs for the United States and its major trading partners.
Zurita et al. (Sun,) studied this question.