November 13, 2019 06:48 AM RSS

Evidence Growing Trump's Trade Wars Damaging U.S. Economy

  • Wall Street Rebel | James DiGeorgia
  • 03/04/2019 5:06 PM
Evidence Growing Trump's Trade Wars Damaging U.S. Economy

President Donald Trump is bragging about how he’s single-handedly winning his trade wars and bring in tens of billions of dollars in windfall tax revenues in the process. With each boast about his trade wars, he claims his trade wars are helping the U.S. economy grow. “Promises Made, Promises Kept, yet all the empirical evidence shows the U.S. economy is a net loser since President Trump unilaterally declared his trade wars against most of the world.


By James DiGeorgia,

This past weekend, some of the world’s leading trade economists in two separate economic papers insist that President Trump’s tariffs are dangerous and represent the greatest danger to the U.S. and world economy since 1930. 1n 1930 the United States enacted the Smoot-Hawley tariffs that are universally blamed for deepening the Great Depression that not only gripped the United States but the entire world, and led to World War II.

 

The two economic research papers arrive at the same conclusion that the cost of Trump’s duties to the United States economy has been in the 10’s of billions of U.S. Dollars and is being shouldered mostly by U.S. consumers.

 

In one of the studies released this past Saturday, Federal Reserve Bank of New York, Princeton University and Columbia University economists determined that tariffs imposed last year by President Trump on Chinese imports ranging from washing machines and steel to some $250 billion.  In total, these tariffs were costing U.S. companies and consumers a whopping $3 billion a month in additional tax surcharges and companies an additional $1.4 billion in losses because they were covering the increase cost increases driven by the Trump tariffs. The tariffs would end up costing businesses $165 billion in significant additional costs for companies that have been forced reorganize their manufacturing supply chains.


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Economists, Mary Amiti, Stephen Redding and David Weinstein also discovered in the research that almost all of the cost of the tariffs were being paid by U.S. consumers and companies which contradicts President Trump’s claim that China and others involved in the trade war were bearing the cost of his tariffs.

David Weinstein said in an interview on Saturday

“This is kind of the worst-case scenario in terms of consumers. “It’s pretty clear Trump’s trade war is a net win for the economy at this point.’’

In a separate economic paper released this past weekend by Pinelopi Goldberg, the World Bank’s chief economist and former editor-in-chief of the prestigious American Economic Review and four affiliated economists estimated the annual losses amount to $68.8 billion, or almost 0.4 percent of the gross domestic product of the United States.

 

Exports


Alt (photo: A cargo ship at the Port of Savannah)


That was offset by the gains from protectionism derived by U.S. producers benefiting from the tariffs, the economists found. After accounting for the impact of higher tariff revenue and the benefits of higher prices to domestic producers, the study found the aggregate annual loss for the U.S. economy fell to $6.4 billion, or 0.03 percent of GDP.

The study by Goldberg, Pablo Fajgelbaum of UCLA, Patrick Kennedy of the University of California, Berkeley, and Amit Khandelwal of Columbia also found that consumers and U.S. companies were paying most of the costs of the tariffs.

However, it also went a step further: After factoring in the retaliation by other countries, the main victims of Trump’s trade wars had been farmers and blue-collar workers in areas that supported Trump in the 2016 election.

Retaliation Costs

“Workers in very Republican counties bore the brunt of the costs of the trade war, in part because retaliations disproportionately targeted agricultural sectors, and in part, because U.S. tariffs raised the prices of inputs used by these counties,’’ the authors wrote.

Alt (photo: Soybeans are loaded into a grain)


The studies are the most authoritative yet to document the negative effect of Trump’s tariffs on the U.S. economy, though others have shown the negative consequences. Economists at the Institute of International Finance last week calculated Chinese retaliatory tariffs alone were causing roughly $40 billion a year in lost U.S. exports.

Official trade data due to be released on Wednesday also are expected to show the U.S. trade deficit in goods with the world hitting a new record in 2018 because of the combination of a surge in imports to get ahead of the new tariffs last year and slowing exports.

A spokeswoman for Trump’s Council of Economic Advisers declined to comment on the new papers and referred inquiries to the office of U.S. Trade Representative Robert Lighthizer. Spokespeople for USTR did not immediately respond to a request for comment.

In a speech, Saturday to conservative activists Trump dismissed criticism of his tariffs and boasted that he was merely following what he argued was a glorious history of using import taxes in American history.

“I found some very old laws from when our country was rich -- really rich -- the old tariff laws. We had to dust them off. You could hardly see, they were so dusty,” Trump told the Conservative Political Action Conference.

At a minimum, Trump said, tariffs were “the greatest negotiating tool in the history of our country,” pointing to talks now underway with China which appear increasingly likely to result in a deal in the coming weeks.


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