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.
“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 above-market 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.
“As simple economics tells us, the Trump tariffs on washing machines aren’t imposed on foreign appliance producers like Samsung and LG as much as they are imposed on Americans in the form of higher prices for consumers,” Mr. Perry wrote in his economics blog Carpe Diem. “Likewise, 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.”
Beijing on Thursday accepted Treasury Secretary Steven T. Mnuchin’s invitation to a new round of trade talks before the next tranche of tariffs.
The tweet appeared aimed at a Wall Street Journal report about Mr. Mnuchin’s invitation. Mr. Trump said the newspaper got it wrong about which side is under pressure to deal.
“Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?” he wrote.
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