Amer­i­cans feel­ing lit­tle from Trump tar­iffs

The Washington Times Weekly - - National - BY S.A. MILLER

Amer­i­can con­sumers have not felt widespread price in­creases months af­ter the Trump ad­min­is­tra­tion started rolling out tar­iffs, and econ­o­mist Robert Scott says the dooms­day pre­dic­tions might never ma­te­ri­al­ize.

The Trump ad­min­is­tra­tion’s tar­iffs have had a tiny im­pact on the econ­omy, shav­ing about 0.1 per­cent, or $18 bil­lion, off the United States’ more than $18 tril­lion gross do­mes­tic prod­uct, ac­cord­ing to an anal­y­sis by the left-lean­ing Eco­nomic Pol­icy In­sti­tute.

“Even if all of the tar­iffs threat­ened by Trump on autos and China are im­posed, those would amount to, at most, 0.8 per­cent of GDP, which would cause barely a rip­ple in growth, in­fla­tion or em­ploy­ment num­bers,” said Mr. Scott, se­nior econ­o­mist at the think tank.

He is largely alone among economists, who over­whelm­ingly view tar­iffs as bad pol­icy that drive up prices and hurt the econ­omy.

Even Mr. Scott said the tar­iffs have failed to ac­com­plish Mr. Trump’s stated goal of forc­ing bet­ter trade deals, no­tably with China, and re­duc­ing the U.S. trade deficit.

“By rais­ing the price of im­ports, he is dis­cour­ag­ing peo­ple from con­sum­ing im­ported goods. That’s fine, but he’s do­ing noth­ing to ex­pand ex­ports,” he said.

The Trump ad­min­is­tra­tion is poised to hit China, Amer­ica’s largest trad­ing part­ner, with an­other $200 bil­lion in tar­iffs. Mr. Trump threat­ened to in­crease that num­ber by an­other $267 bil­lion to bring the to­tal tar­iffs to an amount equal to all of China’s an­nual ex­ports to the U.S.

The ad­min­is­tra­tion al­ready im­posed tar­iffs on $50 bil­lion of Chi­nese goods, slapped tar­iffs on alu­minum (10 per­cent) and steel (25 per­cent), and raised du­ties on wash­ing ma­chines (up to 50 per­cent) and so­lar pan­els (up to 30 per­cent).

The tar­iffs even­tu­ally will hit con­sumers when busi­nesses pass on higher costs for prod­ucts rang­ing from elec­tron­ics to food sea­son­ing.

Most of the shoes and at least half of the mat­tresses and fur­ni­ture sold in the U.S. are made in China.

The Fed­eral Re­serve’s lat­est sur­vey of busi­ness con­di­tions found ris­ing con­cerns about the im­pact of Mr. Trump’s tough trade poli­cies.

Busi­nesses re­mained op­ti­mistic about near-term prospects, but wor­ries about trade prompted some to scale back or post­pone cap­i­tal in­vest­ment plans, ac­cord­ing to the Fed’s sur­vey, known as the Beige Book, re­leased Wed­nes­day.

The busi­nesses re­ported that higher tar­iffs were push­ing up costs for some man­u­fac­tured goods, and the re­tail prices of goods and ser­vices is ris­ing at a mod­er­ate pace. The costs of tar­iffs will take time to reach con­sumers, and the even­tual im­pact could be in­dis­tin­guish­able from a gen­eral trend of ris­ing prices.

Amer­i­cans don’t no­tice the 25 per­cent duty on light trucks, known as the “chicken tax,” that has been on the books since 1964, when Pres­i­dent John­son levied it in re­tal­i­a­tion for France and West Ger­many’s tar­iff on U.S. chicken. The duty on light trucks, which ac­count for about 50 per­cent of auto sales in the U.S., was hardly men­tioned be­fore Mr. Trump started threat­en­ing Europe with tar­iffs on ve­hi­cles.

It re­sulted, how­ever, in Amer­i­cans for decades miss­ing out on in­no­va­tions from Euro­pean truck mak­ers and pay­ing higher prices for U.S. pick­ups and sport util­ity ve­hi­cles, said Mark J. Perry, an econ­o­mist at the Amer­i­can En­ter­prise In­sti­tute.

“I sup­pose that pro­tec­tion­ism has just been ac­cepted and ‘baked into the cake’ for the U.S. ve­hi­cle mar­ket, and U.S. con­sumers aren’t even aware that Ford and GM have a ‘car­tel’ for the U.S. truck mar­ket that al­lows them to charge above­mar­ket prices and earn above-mar­ket prof­its for trucks,” he said.

Farm­ers felt the pain when China tar­geted them with re­tal­ia­tory tar­iffs, cut­ting off a ma­jor mar­ket for U.S. agri­cul­ture ex­ports.

The Trump ad­min­is­tra­tion this month in­tro­duced $12 bil­lion in pro­grams to bail out farm­ers caught in the trade war and help them find new mar­kets.

The tar­iffs on wash­ing ma­chines have hit con­sumers. In the months af­ter the duty, im­ports plum­meted and prices soared.

Prices for wash­ing ma­chines jumped 16.4 per­cent from Fe­bru­ary to May, the most rapid three-month in­crease in the 40-year his­tory of the Bureau of La­bor Statis­tics’ in­dex for laun­dry equip­ment.

“Trump’s ill-ad­vised trade war, which started in Jan­uary when he ap­proved the tar­iffs on im­ported wash­ing ma­chines, is re­ally largely a war on Amer­i­cans.” Mr. Perry wrote in his eco­nom­ics blog Carpe Diem.

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