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How Trump’s Tariffs Have Backfired for American Companies

Part of his sweeping Make America Great Again vision, President Trump has promised to resurrect U.S. manufacturing by slapping steep tariffs on foreign competitors, principally China. But a new report from the U.S. Federal Reserve suggests that his efforts have actually backfired for American companies.

In fact, the manufacturing industry is in worse shape than it was before the president kicked off his aggressive trade war, suggests the report. Job losses within the sector have swelled, and prices of products have ticked up at the expense of American consumers, the report found.

Economists Aaron Flaeen and Justin Pierce analyzed the effect of tariffs on three key aspects: manufacturing employment, output and producer prices. “We find that U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment as a positive effect from import protection, [but this] is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices via rising input costs,” they wrote.

And although Flaaen and Pierce point out that analysis of the longer-term effects of the tariffs may yield a different picture, “the results indicate that the tariffs, thus far, have not led to increased activity in the U.S. manufacturing sector.”

The sectors that were hardest hit by retaliatory tariffs include automakers and producers of iron and steel; aluminum sheet; magnetic and optical media; and leather goods. There is also evidence that other industries such as agriculture are being negatively impacted by retaliatory tariffs.

The Fed’s findings — which affirm the warnings of many top economists that tariffs would be detrimental to the U.S. economy — directly contradict the president’s bullish declarations that his tariffs are working as intended. In a November 2018 tweet, Trump claimed that “billions of dollars are pouring into the coffers of the U.S. because of the tariffs.”

However, the president’s contentious trade war within China could be nearing a turning point. The South China Morning Post reported today that Chinese Vice Premier Liu He, the country’s top negotiator, will travel to Washington, D.C., this week to sign the so-called “phase one” trade deal with the U.S. The newspaper, citing a source briefed on the matter, said China has accepted the U.S. invitation for a deal-signing in Washington, and that the Chinese delegation will stay in the U.S. for “a few days.”

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