Tariff Mistake Smoking Gun: Trade Deficit Soars, Expect Negative GDP Revisions
- Author: Rogelio Becker Mar 08, 2019,
Mar 08, 2019, 0:42
China and the United States have been embroiled in a trade dispute since last June, when Trump announced that the United States would subject $50 billion worth of Chinese goods to 25 percent tariffs in a bid to fix the US-Chinese trade deficit. As I noted yesterday, a new study on the economic costs of the tariffs shows they they are costing $1.4 billion every month-that's above and beyond the direct costs created by the tariffs, which have transferred more than $12 billion from American consumers to the U.S. Treasury in the form of higher taxes.
Mr Trump hit roughly half of Chinese imports with taxes a year ago, a move created to kick-start trade negotiations with the goal of increasing exports to that country and stopping the forced turnover of USA technology and theft of intellectual property.
"Macroeconomics end up ruling", former Commerce Department official, William Reinsch, told the Post. You can't wish it away.
The "Tariff Man", who has described tariffs as "the greatest negotiating tool in the history of our country" and has said that "trade wars are good, and easy to win", created a benchmark for the success, or failure, of his trade policies. But the tariff hikes have since been postponed as the administration has cited progress in trade talks with China.
While that reserve currency status does handicap the competitiveness of USA exports, it lowers borrowing costs for United States borrowers and enables Americans to enjoy a higher standard of living than they would if there were no trade deficits.
Is what is now politically and historically "Trump's trade deficit" really his fault?
"Billions of dollars, right now, are pouring into our Treasury", he told the Conservative Political Action Conference, adding that Chinese exporters are absorbing nearly the entire burden of the tariffs. US and Chinese officials have recently signaled that they're close to some kind of agreement, although China has only bolstered its commitment to investing in and developing its technology sector and questions about how to enforce any trade rules remain. After all, the new NAFTA looks an bad lot like the old NAFTA, plus some language cribbed from the Pacific trade pact Trump pulled us out of. For now, however, given the slow economic growth of the Obama years and the strong growth recently, it sure looks, to those of us living through the moment, like that's what's going on. Moreover, Trump pulled the US out of the longstanding trilateral North American Free Trade Agreement, which came into force in 1994 to unify the US, Canada, and Mexico. And there is some concern that, rather than choking off America's trade deficit, the new tariffs are having unintended consequences. "When things are booming we consume more imports". American consumers and businesses have not stopped buying foreign goods, as the new data indicates, but they are paying higher prices for the privledge of doing so.
Weinstein's study, co-written withMary Amiti of the Federal Reserve Bank of NY, and Princeton University's Stephen Redding, reviewed what actually occurred past year after U.S. tariffs took effect and concluded that Americans paid the entire tariff bill.
That study also found that workers in Republican-leaning counties, especially in farm states, suffered the greatest losses from tariffs that U.S. trading partners imposed in retaliation for the president's actions.
That has been exacerbated by the tariffs, which have not only been blunted by the currency relativities but have been largely absorbed by United States companies or passed on to U.S. consumers in the form of higher prices.
"Many Pennsylvania farmers and manufacturers have already been harmed by tariffs".
Economists expect exports to remain weak even if Washington and Beijing strike a trade deal.