Trump’s tariff talk rattles global economy
NEW YORK — The global economy was already showing signs of a slowdown when President Donald Trump reminded the world of his love of tariffs and sent a chill through financial markets.
“I am a Tariff Man,” Trump announced Tuesday to signal his devotion to import taxes — a remark that served to downplay the likelihood of ending his trade war with China. Stocks sank across the world, in part over fear that an escalation in tariffs would choke off economic growth and possibly send a global slowdown into a recession.
By Wednesday, Tariff Man had tweaked his message to suggest more optimism on the odds of forging a deal with Chinese President Xi Jinping. Their meeting last weekend at an economic conference in Argentina produced a 90-day truce, a suspension of further increases in U.S. tariffs on Chinese goods and a pledge by Beijing to buy more U.S. goods.
“Not to sound naive or anything, but I believe President Xi meant every word of what he said at our long and hopefully historic meeting,” Trump tweeted. “ALL subjects discussed!”
Still, Trump’s rattling of the global economy came at a precarious moment, with the economic outlook for 2019 dimming and concerns about a potential recession — if not next year then soon thereafter — rising.
The economic stimulus from U.S. tax cuts is beginning to fade. Britain is struggling to leave the European Union. Italy’s debt is widening. China is trying to navigate a slowdown after decades of unsustainably fast growth. Germany, Europe’s largest economy, shrank in its most recent quarter.
Now, businesses, consumers and nations must account for the chaotic confusion injected by Trump’s evolving and conflicting messages about his administration’s trade relationship with Beijing, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“The uncertainty caused by the whipsawing of his trade stance means that business investment will be delayed or canceled, marginal hiring decisions will be postponed and potential overseas business partners will look elsewhere,” Shepherdson said.
Complicating the problem is that all this is happening against the backdrop of weakening growth around the world.
“The global picture is getting murkier, and that’ll impact the eurozone via trade and sentiment,” Erik Nielsen, chief economist at Unicredit bank, said in a note to clients.
White House aides have suggested that Trump is promoting tariffs merely as a tool to forge agreements that would actually eliminate all import taxes. And at the opening of this week, the administration was already claiming progress with China on the purchase of $1.2 trillion worth of U.S. goods — even though White House officials couldn’t supply any meaningful details.
“President Trump regards himself as a trade reformer,” Larry Kudlow, director of the White House National Economic Council, told reporters Monday. “He wants a world of zero tariffs and zero non-tariff barriers and zero subsidies.”
Then, on Tuesday, Trump seemed to thumb his nose at that White House talking point by dubbing himself “Tariff Man.”
The problem for the global economy is that tariffs tend to inflate prices, depress trade and reduce the incomes of everyday workers. That’s because companies must either absorb the higher costs created by tariffs or pass them on to their customers.
The Tax Foundation, a conservative think tank, studied the $42 billion of tariffs already imposed by Trump, which include taxes on steel, aluminum, washing machines and the duties being charged on Chinese imports. Its analysis, released Wednesday, concluded that these tariffs had reduced incomes by an average of $146 for taxpayers who earn between $27,740 and $43,800. The tariffs also cut U.S. hiring by the equivalent of 94,300 full-time jobs.
If Trump proceeds with the additional tariffs he has threatened, Tax Foundation analyst Erica York estimates that middle-income households would lose an additional $453.
“The bottom line: Tariffs don’t in fact make Americans richer,” York said. “Tariffs reduce incomes for American taxpayers, and the effect is greater for middle- and lower-income families.”