We study how monetary policy shapes macroeconomic outcomes in a two-sector small open economy hit by export shocks —due, e.g., to export tariffs, geopolitical tensions, or a recession in destination countries— allowing the shock to have both aggregate and distributional effects. Imperfect worker mobility across sectors, coupled with incomplete markets against aggregate and idiosyncratic shocks, implies that export contractions (i) spill over across sectors due to households’ precautionary