Threatening a tariff can impose the same economic costs as actually collecting one, even if the threat is later withdrawn.
March 31, 2026
Original Paper
Shadow Tariffs and the Executive Volatility Regime
SSRN · 6475119
The Takeaway
It introduces the concept of 'shadow tariffs,' where the mere volatility of executive threats forces companies to reprice risk and reconfigure supply chains. Because these defensive adjustments are costly and hard to reverse, the harm to the economy is 'collected' by the market even when no revenue ever reaches the government.
From the abstract
This Article identifies and theorizes a neglected tariff instrument: "shadow tariffs," the tariff-like burdens created by executive volatility rather than by durable border collection. When an administration repeatedly announces, delays, conditions, escalates, and reverses tariffs, it changes the expected distribution of future trade costs. Corporations respond ex ante by repricing risk, rewriting contracts, pulling forward inventory, reconfiguring supply chains, investing in compliance and orig