New Report Estimates Economic Damage from Tariffs

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Posted by Samantha Capriotti on Friday, February 15th, 2019, 11:48 AM PERMALINK

President Trump has taken important steps to improve trade deals with foreign nations that allow American workers and businesses to compete. Although he is right to take action to solve these issues, raising tariffs and setting quotas places a burden on Americans. Protectionist policies are hurting the economy, causing job loss and negating the gains from recent tax reforms, according to a report released by Trade Partnership Worldwide.

New U.S. tariffs, in combination with China’s failure to respect intellectual property rights and rule of law, have trigged a trade war between the two nations.  As of November 2018, tariffs affected $255 billion worth of imports, while foreign tariffs affected $124 billion of American exports.  In response, China has threatened to increase their tariffs, potentially impacting an additional $290 billion in exports.

The administration's Section 232 steel and aluminum tariffs have been similarly harmful to global trade and have opened the door to retaliatory tariffs.  Mexico, Canada, Turkey, the EU, and Russia have responded with increased tariffs, causing a decrease of American exports by 36.7 percent.   

According to the study, the threatened tariffs, which include Section 232 tariffs on steel and aluminum,  25 percent tariffs on China, and tariffs on automobiles could result in annual GDP loss of 1.04 percent, costing a family of four $2,389 per year, and costing the U.S. 2.2 million jobs. 

This trade action is clearly harming American businesses - Harley Davidson announced they will be relocating some of their production overseas, claiming the only way they can sustain sales is avoiding EU tariffs. This is not an isolated case – trade barriers lead to increased cost to the producer and consumer, which means less buyers, and in turn, layoffs. 

Free trade is vital for America’s economy and employment.  International trade directly impacts more than 20 percent of all jobs in America, totaling close to 41 million.  Historically, tariffs have failed America, prolonging the Great Depression and declining trade.  Since World War II, the United States has decreased trade barriers with bipartisan support and success.  This has paid enormous dividends domestically and abroad.  The United States must continue this trend. 

Tariffs’ negative effects, such as unemployment and declined trade and spending, far outweigh the temporary benefits.  While President Trump is right to fight for American jobs and businesses, these protectionist policies risk undercutting all the good his administration has achieved for the economy thus far.  America should lower its tariffs, and abandon any plans to implement more, to protect U.S. workers and the economy.   

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