Evidence grows Trump’s trade wars are hitting US economy

Bloomberg

President Donald Trump regularly declares that he’s winning his trade wars. Yet evidence is growing that the US economy is a net loser so far.
In two separate papers published over the weekend, some of the world’s leading trade economists declared Trump’s tariffs to be the most consequential trade experiment seen since the 1930 Smoot-Hawley tariffs blamed for worsening the Great Depression. They also found the initial cost of Trump’s duties to the US economy was in the billions and being borne largely by American consumers.
In a study published, economists from the Federal Reserve Bank of New York, Princeton University and Columbia University found that tariffs imposed last year by Trump on products ranging from washing machines and steel to some $250 billion in Chinese imports were costing US companies and consumers $3 billion a month in additional tax costs and companies a further $1.4 billion in deadweight losses. They also were causing the diversion of $165 billion a year in trade leading to significant costs for companies having to reorganise supply chains.
Significantly, the analysis of import price data by Mary Amiti, Stephen Redding and David Weinstein also found that almost all of the cost of the tariffs was being paid by US consumers and companies. That contradicts Trump’s claim that China is paying the tariffs.
“This is kind of the worst-case scenario in terms of consumers,’’ Weinstein said in an interview. “It’s pretty unclear that this trade war is a net win for the economy at this point.”
The trade war was only one factor affecting the US economy, Weinstein said, and with the US less exposed to trade than other major western economies such as Germany, it was not having as much of an impact as it might.

DELAYED INVESTMENT
But the numbers were still consequential, he insisted. They also did not capture all of the costs to the US economy. The three economists are now working on quantifying the amount of investment that has been put on hold as a result of the heightened uncertainty caused by the trade wars, Weinstein said.
In a separate paper, four economists including Pinelopi Goldberg, the World Bank’s chief economist and a former editor-in-chief of the prestigious American Economic Review, put the annual losses from the higher cost of imports alone for the US economy at $68.8 billion, or almost 0.4 percent of gross domestic product.
That was offset by the gains from protectionism derived by US producers benefiting from the tariffs, the economists found. After accounting for the impact of higher tariff revenue and the benefits of higher prices to domestic producers the study found the aggregate annual loss for the US economy fell to $6.4 billion, or 0.03 percent of GDP.
The study by Goldberg, Pablo Fajgelbaum of UCLA, Patrick Kennedy of the University of California, Berkeley, and Amit Khandelwal of Columbia also found that consumers and US companies were paying most of the costs of the tariffs.
But it also went a step further: After factoring in the retaliation by other countries, the main victims of Trump’s trade wars had been farmers and blue-collar workers in areas that supported Trump in the 2016 election.

RETALIATION COSTS
“Workers in very Republican counties bore the brunt of the costs of the trade war, in part because retaliations disproportionately targeted agricultural sectors, and in part because US tariffs raised the costs of inputs used by these counties,’’ the authors wrote.
The studies are the most authoritative yet to document the negative effect of Trump’s tariffs on the US economy, though others have shown the negative consequences. Economists at the Institute of International Finance last week calculated Chinese retaliatory tariffs alone were causing roughly $40 billion a year in lost US exports.
Official trade data due to be released also are expected to show the US trade deficit in goods with the world hitting a new record in 2018 because of the combination of a surge in imports to get ahead of the new tariffs last year and slowing exports.
A spokeswoman for Trump’s Council of Economic Advisers declined to comment on the new papers and referred
inquiries to the office of US Trade Representative Robert Lighthizer. Spokespeople for USTR did not immediately respond to a request for comment.