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Policy
Economists contest Trump’s boastful statements regarding his economic policies declaring tariffs a boon to manufacturers, workers and consumers.  Tariffs operate like taxes and increase prices to consumers while  simultaneously sacrificing the creation of new jobs. They are not, as Trump has declared, paid by the exporting companies or countries.  Trump’s tariffs in China, and subsequently in the EU, have had extensive negative impacts and questionable small positive consequences.  Though six manufacturing areas have seen some job growth the other 14 categories have not.  Machinery and metal industries have had accelerated job growth but more negative impacts on other industries have resulted. Farmers have been impacted by tariffs on soybeans to China.

Beginning this Spring, Trump increased the China tariffs on another 100 billion dollars worth of goods in mid-September and proposed another 200 billion dollar increase in December.  The total cost of tariffs, including proposed extensions to the end of the year, is 196.7 billion dollars.   It is estimated that current tariffs have cost 300,000 jobs to be sacrificed and the number is projected to rise to 450,000 by the end of the year.  In retaliation for the tariffs imposed on China that nation has increased duties on 75 billion dollars worth of US goods.     Trump then extended tariff reform to the EU and Canada costing jobs and imports. The EU then responded in ways that have affected the sales of  American products. Some examples are a 25% increased tariff of Kentucky Bourbon has decreased overseas sales in the industry which has depended on foreign imports for much of its growth. Harley Davidson has contracted as a result of EU taxes causing the company to shift production to Thailand and to reduce its US workforce.

Analysis
Uncertainty in business causes distress resulting in suspending plans for expansion and spending.  Trump touted the tariffs as a way to compensate for the trade deficit, where the US imports more goods than it exports, but it has not accomplished that.  US exports account for 12% of the GDP and many industries depend on cheap imports, so the tariffs will negatively impact both prices to the consumer and new jobs.

A loophole in the trade law allows for packages under $800 in value to cross the borders from Canada or Mexico without any extra cost as long as they are mailed to individuals.  To avoid the duties more goods are being shipped over the borders and mailed by disbursement centers into the US.  The delivery of small packages jumped by 46% in 2018 with much of this growth likely attributable to the trade wars.

Not only have prices gone up, and job creation stalled, but wages have not increased and any tax benefit which might have been realized from the 2017 reform has been eliminated by increased consumer good prices.  The groups absorbing the biggest hit are those that generally suffer from slowed economic conditions such as decreased jobs; low wages; and high unemployment.  These struggling groups, most of them low wage earners, are bearing the brunt of the trade wars.

References:

Resistance Resources:

  • https://tariffshurt.com/   A website supporting a national campaign to resist the tariffs featuring articles, charts, and figures to demonstrate the cost of these policies.

Photo by unsplash-logoRenan Kamikoga

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