LOADINGERROR LOADINGDonald Trump likes to say he created the strongest U.S. economy in history. But the centerpiece of his plans for a second term — tariffs on imported goods, especially those from China — runs the risk of bringing the U.S.′ currently robust economy to a screeching halt, and possibly the world’s, as well. Despite warnings from even conservative economists, Trump has stood by his proposed 10% tariff as both a moneymaker for the government and a way to show American strength.Advertisement
“Number one, it’s great economically for us and it brings our companies back,” Trump said on CNBC March 11.“It also gives us a big political power. Tariffs are tremendously powerful in terms of stopping wars, because they don’t want tariffs,” he added. “I made other countries sing with the threat of tariffs. And if you don’t have tariffs, we have nothing whatsoever on them.”But economists across the political spectrum say Trump’s tariff plans, particularly with regard to China, the world’s second largest economy, would have a huge risk of backfiring and could supercharge inflation.Mark Zandi, chief economist with Moody’s Analytics, said the U.S. and China combined produce between one-third to almost half of global economic output, and a trade war between them would be devastating.Advertisement
“That decoupling of these two economies — the disengagement, the deglobalization — would be very tough for the global economy to digest,” he said. “Depending on how quickly it’s imposed and timing and all kinds of events, that would significantly diminish the global economy.”Trump’s plans include a 10% tariff on almost all imported goods and higher tariffs in cases where another country has put a large tariff on U.S. goods or has devalued its own currency, as China is accused of doing.In February, he said he was weighing a 60% tariff on Chinese imports specifically.Zandi, though he served as an advisor to GOP presidential candidate John McCain in 2008, is seen as a Democratic favorite in the field. But even conservative economists have raised red flags about Trump’s plans. The American Action Forum, a conservative think tank, said in a November study the 10% tariff would cut imports into the U.S. by more than 11% and trim the size of the American economy by 0.16% — that is, if no other countries retaliated.But the picture changed, according to AAF, if what it called the more likely scenario ensued: trade partners reacting by putting in place their own tariffs on U.S. goods. In that case, the AAF estimated a 0.31% decrease in the size of the economy and a whopping 17.8% decrease in U.S. exports abroad.Advertisement
Capital Economics, an economic analysis and consulting company with offices in London, New York, Toronto and Singapore, came to a similar conclusion in January.“In our work on global fracturing, we have characterised the world as breaking into two distinct blocs — one US-led and one China-led. Trump’s plans to double-down on a trade war with China …
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“Number one, it’s great economically for us and it brings our companies back,” Trump said on CNBC March 11.“It also gives us a big political power. Tariffs are tremendously powerful in terms of stopping wars, because they don’t want tariffs,” he added. “I made other countries sing with the threat of tariffs. And if you don’t have tariffs, we have nothing whatsoever on them.”But economists across the political spectrum say Trump’s tariff plans, particularly with regard to China, the world’s second largest economy, would have a huge risk of backfiring and could supercharge inflation.Mark Zandi, chief economist with Moody’s Analytics, said the U.S. and China combined produce between one-third to almost half of global economic output, and a trade war between them would be devastating.Advertisement
“That decoupling of these two economies — the disengagement, the deglobalization — would be very tough for the global economy to digest,” he said. “Depending on how quickly it’s imposed and timing and all kinds of events, that would significantly diminish the global economy.”Trump’s plans include a 10% tariff on almost all imported goods and higher tariffs in cases where another country has put a large tariff on U.S. goods or has devalued its own currency, as China is accused of doing.In February, he said he was weighing a 60% tariff on Chinese imports specifically.Zandi, though he served as an advisor to GOP presidential candidate John McCain in 2008, is seen as a Democratic favorite in the field. But even conservative economists have raised red flags about Trump’s plans. The American Action Forum, a conservative think tank, said in a November study the 10% tariff would cut imports into the U.S. by more than 11% and trim the size of the American economy by 0.16% — that is, if no other countries retaliated.But the picture changed, according to AAF, if what it called the more likely scenario ensued: trade partners reacting by putting in place their own tariffs on U.S. goods. In that case, the AAF estimated a 0.31% decrease in the size of the economy and a whopping 17.8% decrease in U.S. exports abroad.Advertisement
Capital Economics, an economic analysis and consulting company with offices in London, New York, Toronto and Singapore, came to a similar conclusion in January.“In our work on global fracturing, we have characterised the world as breaking into two distinct blocs — one US-led and one China-led. Trump’s plans to double-down on a trade war with China …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]