One of the President Trump’s most prominent policy actions since taking office has been to raise tariffs, which carry significant negative ramifications for the U.S. economy. Trade barriers such as tariffs increase the cost of both consumer and producer goods and depress the economic benefits of competition, inhibiting economic growth.
The president’s tariffs, when combined with corresponding retaliation, threaten nearly $400 billion of traded goods annually. The following analysis calculates the overall impact these tariffs could have on the prices of goods in the United States.
The Economic Cost of Current Tariffs
There is no shortage of evidence on the economic harm caused by trade barriers: Tariffs inhibit economic growth by increasing the cost of both consumer and producer goods and depressing the economic benefits of competition. Research suggests that tariffs are directly responsible for inflation, depressed aggregate demand, less capital expenditures, and lower productivity levels.
This analysis focuses exclusively on the impact of tariffs unilaterally imposed by the president. These include tariffs—either enacted or officially ordered—under Section 232 or Section 301. Section 232 allows the president to impose trade barriers if the Department of Commerce finds that imports threaten U.S. national security. Section 301 enables the president to impose tariffs or quotas when the United States Trade Representative (USTR) finds that other nations are engaging in unfair trade practices.
The table below lists the approximate value of imports that are currently facing new tariffs under President Trump. It additionally displays estimates of how the tariffs could increase nationwide consumer costs, assuming that 100 percent of the costs from the tariffs will be passed on to consumers and that current import levels will not change. While this estimate is an upper-bound, it represents the upward pressure that is placed on all prices in the economy.
Altogether, the president’s currently imposed tariffs could increase nationwide consumer costs by $69 billion annually. This estimate includes the president’s latest tariff actions. On May 10, 2019, President Trump increased tariffs on nearly $200 billion of Chinese goods from 10 percent to 25 percent, increasing nationwide consumer costs by $32 billion annually. On May 20, the United States removed the steel and aluminum tariffs on Canada and Mexico, reducing the value of affected imports by approximately $12 billion. The latter action in turn reduced the additional consumer costs from the tariffs by $2 billion per year.
[To view the original report, click here]
Copyright © 2019 American Action Forum. All rights reserved.