Tariffs under Trump's administration remain intact
The long-term impact of President Trump's tariffs on the US economy has been largely negative, with mixed results. While certain domestic industries like steel and aluminum producers benefited from reduced foreign competition, the broader effects have included higher input costs, supply chain fragmentation, retaliatory tariffs, and slower economic growth.
Economic Drag on GDP
Tariffs raised costs for many US industries reliant on imported inputs, squeezing profit margins and reducing competitiveness. Estimates suggest a GDP growth drag of around 0.6% to 1.0% through the mid-2020s due to tariffs and retaliatory measures.
Protectionist Effects
Steel and aluminum tariffs boosted some domestic producers but harmed downstream users across manufacturing sectors who faced higher input costs. This contributed to inefficiencies and inflationary pressures in the economy.
Supply Chain Disruption
Particularly in semiconductors and technology, tariffs increased uncertainty and costs, hampering innovation and reshoring efforts. Companies like Intel reported revenue declines linked to this environment.
Retaliation and Export Losses
Foreign retaliation imposed roughly $330 billion in tariffs on US exports, reducing market access for American goods and contributing to a fragmented global trade system.
Inflation and Consumer Impact
Tariffs raised consumer prices by about 1.8%, translating to income losses (~$2,400 per household on average), which dampened purchasing power and economic growth potential.
Market Volatility and Investment Hesitancy
Equity markets saw increased volatility; investors moved toward safe assets amid uncertainty on trade policy. The ambiguity surrounding tariffs slowed business investment decisions.
A More Protectionist and Fragmented Trade Environment
Trump's tariffs created a more protectionist and fragmented trade environment that benefited some domestic sectors short term but harmed overall economic efficiency, growth, and the US's competitive position globally in the longer term. The resulting inflation, supply chain issues, and retaliatory barriers contributed to a period characterized by stagflation risks, supply disruptions, and diminished investment incentives.
Other Concerns
The tariffs can be used as another cudgel with which to beat anyone who stands in the way of the federal government. The Trump administration's use of tariffs has been compared to a "reciprocal tariff bomb" that blew up in its face.
The fiscal benefits from higher tariff taxes, estimated to be $300 billion this year, may be offset by lower GDP growth and lower tax receipts elsewhere. The tariff strategy is being used in various ways, including to influence other countries' internal politics, raise drug cartels' profits, and pay off big political donors.
The Trump administration tore up the North American Free Trade Agreement (NAFTA) and then ended up with something very close to NAFTA, and trade went on much as before with Canada.
[1] https://www.brookings.edu/research/the-trump-administrations-tariffs-are-damaging-the-us-economy/ [2] https://www.forbes.com/sites/jimmyhoover/2019/02/26/how-trumps-tariffs-are-hammering-the-us-economy/?sh=6671e55d488a [3] https://www.cnbc.com/2019/09/19/how-tariffs-are-costing-the-average-american-family-2400.html [4] https://www.washingtonpost.com/business/2018/10/04/trump-tariffs-are-hurting-us-economy-and-american-consumers-heres-how-much/ [5] https://www.bloomberg.com/opinion/articles/2019-06-12/trump-s-tariffs-are-hurting-the-u-s-economy-and-the-world
- The tariffs, particularly in the steel and aluminum sectors, have boosted some domestic producers but harmed downstream users in the manufacturing sector by increasing input costs and contributing to inefficiencies and inflationary pressures.
- The general-news trend suggests that the Trump administration's tariffs strategy can be used as a political tool, influencing other countries' internal politics, raising drug cartels' profits, and paying off big political donors, which has led to concerns beyond just the financial and business aspects of the tariffs.
