Trump's Terrible Trade Tariffs (T-4): Federal Reserve Says Backfired and Cost $42B

Gunner's Mate No Class 

Update on the T-4 “plan: Trump’s Terrible Trade Tariffs” here from a new Federal Reserve study that found President Trump’s tariffs are backfiring.

According to the study, the tariffs that went into effect in 2018 have led to not only higher producer prices but also a loss of jobs across the U.S. — particularly in manufacturing. A previous analysis also found that tariffs have cost the U.S. $42 billion so far.

From this new study the Fed says in part: “In terms of manufacturing employment, rising input costs and retaliatory tariffs each contribute to the negative relationship, and the contribution from these channels more than offsets a small positive effect from import protection. For producer prices, the relative increases associated with tariffs are due solely to the rising input cost channel. We find little evidence for a relationship between industrial production and any of the three tariff channels considered.”

Recall that in December 2018, Trump tweeted: “Almost 500,000 Manufacturing Jobs created since I won the Election. Remember when my opponents were saying that we couldn’t create this type of job anymore. Wrong, in fact these are among our best and most important jobs!”

However, the tit-for-tat tariffs between the U.S. and China have thrown a wrench in his plans to revitalize the manufacturing sector with the Fed saying: “While the longer-term effects of the tariffs may differ from those that we estimate here, the results indicate that the tariffs, thus far, have not led to increased activity in the U.S. manufacturing sector.”

According to the study, the industries hardest hit by the retaliatory tariffs from China include: (1) producers of aluminum sheet, iron, and steel, (2) motor vehicles, (3) household appliances, and (4) computers, and (5) other electronic equipment.

Also significant:

According to the USCBC (US-China Business Council), exports to China support over 1.1 million American jobs. 

Factory workers have particularly bearing the brunt of the retaliatory tariffs from China — the October 2019 job report highlighted the contraction in total factory payrolls, “which not only increases price for companies but also causes investment uncertainty,” that according to Bloomberg. 

Article continues here with chart of T-4 damage.

Related update (December 31, 2019) from Trump. Two key points:

• Trump says he will sign the “phase one” trade deal with China at the White House on January 15.

• Trump says he will travel to Beijing “at a later date” to start talks toward a second part of the trade agreement.

So, just kiss and seal the new deal this time around?

President Xi, Jinping and President Donald J. Trump

(Once again BFF's right??)

My 2 cents: Heluva way to start 2020, isn’t it? Can’t wait to see Trump’s rebuttal tweets – admitting “defeat or loss” are two words not in his short vocabulary list.  

A lot of smart people saw this outcome and now Trump thinks a hug and kiss with Xi Jinping will make things all hunky-dory. Well, I guess we’ll have to wait and see about that. Stay tuned.

In the meantime, let’s all try to have a great 2020 … that’s asking a lot with a start like this but in tough times Americans trend to coalesce and pull together for a better outcome – now would be a good time for that effort I think.

Thanks for stopping by