Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market Bull Trap? January 22 Top Likely - 19th Jan 19
After the Crash, the Stock Market Made a V-shaped Recovery. What’s Next - 19th Jan 19
David Morgan: Expect Stagflation and Silver Outperformance in 2019 - 19th Jan 19
Why Brampton Manor Academy State School 41 Oxbridge Offers is Nothing to Celebrate! - 19th Jan 19
REMAIN Parliament Prepares to Subvert BrExit with Peoples Vote FIXED 2nd EU Referendum - 19th Jan 19
Gold Surges on Stock Selloff - 18th Jan 19
Crude Oil Price Will Find Strong Resistance Between $52~55 - 18th Jan 19
Stock Market’s Medium Term is No Longer Bullish. It is Now Mixed - 18th Jan 19
SPX and Gold; Pivotal Points at Hand - 18th Jan 19
Fable Media Launches New GoWin Online Casino Affiliate Site in UK - 18th Jan 19
The End of Apple! - 18th Jan 19
Debt, Division, Dysfunction, and the March to National Bankruptcy - 18th Jan 19
Creating the Best Office Space - 18th Jan 19
S&P 500 at Resistance Level, Downward Correction Ahead? - 17th Jan 19
Mauldin: My 2019 Economic Outlook - 17th Jan 19
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

How Trump’s Trade Policies Actually Damage the Economy

Economics / Protectionism Dec 29, 2018 - 03:22 PM GMT

By: Patrick_Watson

Economics We have a temporary truce in the trade war.

No one is quite sure if it will last, especially financial markets. After a short-lived rally, they saw little to celebrate in the latest Trump-Xi meeting. 

The US and China have serious disputes. And I think tariffs are the wrong tool to solve them. So I’m not optimistic this break will accomplish much either. We’ll see.


Have you noticed all the war-like metaphors? We talk about trade war, ceasefires, weapons, battlefields, casualties, victory, defeat. The terms seem to fit, at least symbolically.

Trade war isn’t real war. But like real war, it has costs and hurts people, even if it ultimately achieves the goal.

Before we intensify this trade war with China, we should consider those costs.

The Direct Impact of Tariffs

Even pro-tariff people usually acknowledge that tariffs cause economic damage. How much damage is hard to pin down—especially when the policies are complex and change frequently.

However, we’re starting to see estimates.

Economists and think tanks have calculated what damage Trump’s trade policies did to the economy. The answer is, “A lot.”

An ImpactECON study found that, if all of Trump’s current and proposed policies actually happen…
  • US gross domestic product (GDP) in 2019 will be $365.1 billion lower than it otherwise would.
  • The lost production will be $2,357 per household or $915 per person.
  • Some 2.75 million jobs will be lost.
  • Remaining workers will see lower wage growth.   

Another study from the Tax Foundation is somewhat less dire. It thinks the job losses would be smaller and GDP would drop “only” about $125 billion. It also shows how lower-income groups would hurt the most.

Both these studies try to quantify something we can’t know precisely. We know it will be negative, at least initially.

But that’s just the direct tariff impact. There’s more.

Intentional Chaos and Paralysis

One irony in all this: Trump’s tariffs might work better if he weren’t so nice about imposing them.

By “nice,” I mean he gives everyone plenty of warning. He complains, makes threats, and (sometimes) follows through on them, months later. Other times, he decides to forgive and forget.

That’s not an accident.

Trump thinks keeping the opposition mystified gives him negotiating leverage. In the real estate business, it probably did. In government, not so much.

Corporate CEOs and boards can’t just shrug off presidential threats. If it is something that would hurt their business, they have to start preparing. So we get things like the inventory stockpiling that may cause a slowdown next year.

Worse, Trump’s intentional chaos induces paralysis.

Part of the tariff idea is that US manufacturers will begin producing the foreign goods from places like China that don’t compete fairly. But for that to happen, businesses here need to build factories, hire and train new workers, and so on.

Making those investments is foolish when the government policy that justifies them could change at any time. I think that’s one reason we see slower new equipment spending by US businesses.

Better Choices

We know two things.

  • Tariffs are already damaging the economy... but
  • The hoped-for benefits are not yet apparent.

In other words, the costs are certain. The benefits aren’t. And the longer we wait to see if they’ll work, the more the costs add up.

This has real human consequences. Slowing growth and higher prices mean people lose jobs, don’t get raises, can’t afford their medicine. Entrepreneurs can’t raise capital to start businesses.

Slowly but surely, the damage spreads through the economy.

Get one of the world’s most widely read investment newsletters… free

Sharp macroeconomic analysis, big market calls, and shrewd predictions are all in a week’s work for visionary thinker and acclaimed financial expert John Mauldin. Since 2001, investors have turned to his Thoughts from the Frontline to be informed about what’s really going on in the economy. Join hundreds of thousands of readers, and get it free in your inbox every week.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules