New Research: US Workers, Consumers & Businesses Paid for Trump's Trade War with China
Economists have been crunching the data regarding the impact of former President Donald Trump's trade war with China. As widely predicted at the time, it harmed US businesses and consumers without lowering America's trade deficit with China. Brookings published a major piece on the trade war with China last year.
Brookings: "Numerous studies have found that U.S. companies primarily paid for U.S. tariffs, with the cost estimated at nearly $46 billion. The tariffs forced American companies to accept lower profit margins, cut wages and jobs for U.S. workers, defer potential wage hikes or expansions, and raise prices for American consumers or companies. A spokesperson for the American Farm Bureau stated that “farmers have lost the vast majority of what was once a $24 billion market in China” as a result of Chinese retaliatory actions."
And, the negative impact on the US job market was even greater than originally feared.
Sydney Morning Herald: "On Friday the US-China Business Council, which represents the big US companies with operations in China, said the tariffs had caused the loss of 245,000 US jobs because US companies and consumers, not Chinese exporters, had absorbed their cost."
Moreover, a new study conducted by Moody's Investor Services found that "just 7.6 percent of the U.S. tariffs ended up being absorbed by China, while the rest of the tab was picked up by Americans." US businesses either accepted lower margins or passed along the increased costs to consumers. And Moody's warns that corporations will continue to pass along more of the costs to consumers if the tariffs continue.
"If the tariffs remain in place, pressure on US retailers will likely rise, leading to a greater pass-through to consumer prices." - Moody's Investor Services
So far, President Joe Biden hasn't reduced Trump's tariffs. He has several reasons. First, most Americans don't spend a great deal of time reading economic research and other than farmers, many don't understand the negative consequences. Additionally, the political climate in America regarding China is dismal right now and China's provocations in the South China Sea and toward Hong Kong and Taiwan have made matters worse. And, if you throw in China's horrendous human rights record, you can understand why no politician wants to be seen as soft on China even if it would help the US economy.
However, another recent paper from the US-China Business Council argues that Biden should find some politically palatable way to end the trade war.
US-China Business Council: "Scaling back tariffs would likely benefit the US economy and create jobs. Even a moderate rollback in tariffs could increase economic growth and stimulate employment growth. Under our trade war de-escalation scenario, where both governments gradually scale back average tariff rates to around 12% (compared with around 19% now), the US economy produces an additional $160 billion in real GDP over the next five years and employs an additional 145,000 people by 2025. US household income would be $460 higher per household as result of increased employment and incomes as well as lower prices."
To be fair, other economists think those estimates may be a bit high, but there is literally no economic research that backs continuing Trump's trade war with China. It's been a dismal failure, costing us money and jobs each day, and it hasn't curtailed the policies that harm American interests the most.
By: Don Lam & Curated Content