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The Tariff Effect

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One word has been at the center of economic debate in recent months: tariffs. As the federal government continues to navigate a variety of economic sanctions, U.S. tariff policies have fluctuated significantly, creating widespread uncertainty in financial markets around the world. It’s easy to view these policies as purely diplomatic or limited to the federal government, but their impact extends far beyond Washington. U.S. markets, businesses, and local governments are all experiencing the consequences, and public finance professionals acknowledge the real fiscal strain tariffs can cause.

Although the United States shares the global burden of the recent economic hardship brought on by COVID-19, the current climate of tariff uncertainty presents a different challenge. The effects of existing tariffs—alongside the speculation about future ones—do not stop at the federal level. Emerging research and expert insights suggest that local governments are increasingly exposed to the downstream effects of trade policy decisions.

This article will dive into the effects tariffs have on local governments. It will provide an understanding of the trade revenue link, discuss a case study, examine fiscal tools and strategies, and review implications for policy and risk planning.


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