New Report Shows Current Trade Policy Could Have Negative Impact On Economy


According to a new report, President Trump’s trade policy could end up costing American households next year to the tune of thousands of dollars.

The report, sponsored by the Koch Industries (pro-free-trade), and authored by Peter Minor and Terrie Walmsley, comes to the conclusion that Trump’s trade policy which he threatens will include continuing, imposing, or boosting tariffs on steel and aluminum, auto imports, and Chinese products. The report, which was released Tuesday, concluded that these tariffs could end up taking a major chunk of the economy.

The US administration’s goal of the trade policy is stated as being to strengthen the economy. However, as stated by the report’s authors, they found indications to the contrary. The administration actions may potentially end up being costly, reducing economic growth in the US instead.

The explanation for this potential economic slowdown is somewhat simple. Tariffs are basically taxes placed on imported goods, which makes items that have been hit with tariffs more expensive. By comparison, this results in making American-made goods cheaper, however, it drives up costs for both consumers and businesses in the US.

Because of the higher prices, this could then lead to a decrease in consumers and businesses purchases, which would result in the decline of job growth, lower the amount of investment capital, and lead to sluggish economic activity. According to estimates, this wouldn’t plunge the US into a recession, but the decline in economic activity would be considerable.

The fact is if all current and proposed trade actions are put into place, they could impact both US imports and exports in the amount of one trillion dollars. The accruing impact on America could include the following:

  • The gross domestic product (GDP) would see a reduction in 2019 of 1.78 percentage points and a further reductionof 1.25 percentage points by 2030.
  • These GDP losses would add up to a loss of 2.8 trillion dollars between now and the year 2030.
  • Except for China and American, all other countries would stand to gain from US trade actions.
  • Households are predicted to lose the equivalent of $915 per person or $2357 per household in 2019.
  • Initially, USworkers will be protected from unemployment due to higheconomic growth; however, unemployment would eventually increase once trade actions have been initiated and partners respond.
  • If all trade actions are implemented at the same time, 2.75 million workers will most likely lose their jobs. Diminishing wage growth will lead to an increased possibilityof more workers becoming unemployed. It will be problematic, to say the least, for America to maintain wage growth and employment with such enormous negative influence from the combination of all proposed trade actions.
  • A large portion of the job losses will affect both low-skilled and agricultural workers.
  • Also predicted is another 665 thousand workers being displaced in addition to those finding themselves unemployed in 2019, leaving them to look for work in other sectors. Another one million plus workers will find themselves working jobs in other industries by 2030.

Although Trump has suggested recently that many of the trade policies will soon be a reality, it’s not for certain. It’s true that the President has spoken more about the potential tariffs recently.

However, warnings as to what Minor and Walmsley have predicted, such as similar retaliation, have been issued by officials. One can only hope Trump listens to the warnings.