President Donald Trump’s objective to strengthen the U.S. economy by way of aggressive tariffs could come with a high tab and reduce economic growth, according to a new report commissioned by Koch Industries and economic consulting firm Impactecon.
The Trump administration’s trade actions initiated in March when the president firmed up plans to enact sweeping steel and aluminum tariffs on several countries including China, Brazil and Canada. Since then, the U.S. has placed tariffs on $250 billion in Chinese goods, while Beijing has retaliated with levies on $110 billion in American imports.
Just ahead of Friday’s kickoff to the G20 Summit, Trump has threatened to slap even more tariffs on China — if he makes good on that, the total amount of tariffs on goods from the world’s most populous country would hit $517 billion.
The new report suggests that such trade actions could exacerbate the problems they are intended to resolve. Examining the potential impact of the trade war on U.S. and global supply chains, the researchers determined that current and proposed trade actions “will result in substantial costs to the U.S. economy in terms of lost real GDP.” Specifically, the report suggests U.S. gross domestic product could be hurt by 1.78 percent, or $365.1 billion, in 2019.
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It further determined that employment could tumble by 2.75 million more workers in 2019, compared with current forecasts; and household income could shed $2,357 per household, or $915 per person, while government revenues from tariffs increase.
On a positive note, the researchers said their estimates of Trump’s recent trade actions include “historically high” U.S. baseline GDP growth, particularly in 2018 and 2019. That high rate of baseline growth, they said, could offset many of the negative impacts of the trade war.
Nevertheless, they noted, “when all the trade actions are considered together, even the high rate of growth in the U.S. economy is unable to prevent the negative impacts of current and proposed U.S. trade actions on employment.”
As it stands, the global tit for tat over tariffs have spared footwear — but not apparel and handbags — from a direct hit. Still, trade organizations such as the Footwear Distributors and Retailers of America and the American Apparel and Footwear Association have spoken out against the Trump administration’s policy, noting far-ranging negative consequences — most notably a trickle down-impact that leads to higher costs of goods to consumers.
“It’s very difficult to see how [mounting tariffs] don’t negatively impact all Americans in every walk of life,” FDRA president and CEO Matt Priest previously told FN. “The president claimed that trade wars are easy to win, but what our industry has always known is coming true: Trade wars are costly, unnecessary and do harm to the American economy.”