Trump’s tariffs hurting U.S. economy, experts say
NAFTA withdrawal to bring more pain
Business economists are sounding some sour notes about Trump administration policies, from trade to immigration to the budget, while expecting the short-term boost to growth from Republican tax cuts to lessen over time.
The National Association for Business Economics survey showed 91 per cent of respondents said current tariffs and threats of more to come were having “unfavourable consequential impacts” on the U.S. economy, according to a report released Monday. About two-thirds saw negative effects if the U.S. withdraws from the North American Free Trade Agreement with Mexico and Canada.
In the wake of large tax cuts enacted in late 2017, the share of those saying fiscal policy is too stimulative rose to 71 per cent from 52 per cent in February, according to the responses of 251 members collected from July 19 to Aug. 2. And 81 per cent said the federal deficit’s share of gross domestic product should be reduced.
“In general, the panel expects the federal deficit, as a percentage of the economy, to grow in the longer term, with eight out of 10 panellists indicating that fiscal policy should help shrink the deficit as a share of the economy,” said survey chair Jim Diffley, an economist at IHS Markit Ltd.
The cautious views are at odds with the President Donald Trump’s upbeat assessment in tweets last week saying the U.S. economy is “better than ever.” Trump has also touted low rates of youth unemployment and, recently, falling joblessness among African-American and Hispanic workers.
While survey respondents continued to see deregulation and tax cuts giving a boost to growth in the short term, they also saw the effects diminishing over time as government debt continues to rise.
Almost two-thirds said the U.S. corporate tax system following the 2017 Tax Cuts and Jobs Act was an improvement over the previous regime in terms of equity and efficiency, while 25 per cent viewed it as “somewhat worse” or “far worse” than before.
Changes to personal income taxes fared worse, with only 31 per cent considering the new system better in terms of equity and efficiency and about 54 per cent judging it “somewhat worse” or “far worse.”
Some 37 per cent said the tax cuts would boost 2018 U.S. GDP growth by a quarter to half percentage point, while 24 per cent saw gains of a half point to three quarters of a point, the survey showed.
Forecasters were more upbeat on the Federal Reserve, with 76 per cent saying monetary policy is on the right track, the most in the semi-annual survey in more than 11 years, according to NABE. Nineteen per cent of respondents in the current survey said policy is “too stimulative,” while four per cent said the central bank’s stance is “too restrictive.”
“Most panellists believe the Federal Reserve’s current inflation target of two per cent should be maintained. Of the remaining panellists, more favour raising the target than lowering it,” said NABE Vice President Kevin Swift, chief economist for the American Chemistry Council.
Other findings included:
60 per cent said economic policy should do more to mitigate climate change.
74 per cent said economic policy should do more to alleviate income inequality.
63 per cent saw less than a 25 per cent chance of a meaningful infrastructure package in 2019.
45 per cent said the Trump administration’s deregulation drive has positively affected the economy so far, while 35 per cent saw it as a near-term plus that turns negative in the long run.