Trump trade war, China, steel tariff impact on economy, household study

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• President Donald Trump’s trade policy could take a major bite
  out of the US economy, according to a new report.
• The report, commissioned by the pro-free trade Koch
  Industries, modeled the impact if Trump were to go through with
  all of his tariff threats on China and auto imports.
• The report also assumed other countries respond in kind.
• The report found that GDP, household income, and industrial
  production would fall substantially while unemployment rose.

President Donald Trump’s trade policy could cost American
households thousands of dollar next year, according to a new
study released Tuesday.

The report, authored by Terrie Walmsley and Peter Minor and
sponsored by the pro-free market Koch Industries, concluded that
Trump’s threats to
boost tariffs on Chinese
products to 25%, impose tariffs on auto imports, and continue
tariffs on steel and aluminum could take a major chunk out of the
economy.

“A stated goal of the US administration’s trade
policy is to strengthen the US economy,” the
authors wrote. “The findings in this report indicate
that the administration’s trade actions could be potentially
costly and reduce economic growth.”

The reasoning behind the economic slowdown is fairly simple.
Tariffs act as taxes on goods coming into the US, making items
hit with the restrictions more expensive. While this makes US
goods cheaper by comparison, it also drives up costs for American
businesses and consumers.

In response to the higher prices, businesses and consumers could
buy less, resulting in a slower pace of job growth, lower capital
investment, and eventually slower economic activity. While the
researchers’ estimates don’t suggest the US would be plunged into
a recession, they say the slowdown would be substantial.

The amount economic growth
each trade action — auto tariffs, China tariffs, and metals
tariffs —would shave off of GDP through 2030.
ImpactEcon

Here’s a rundown of some of the key findings from the report:

• The total economic cost from the measures from 2018 to 2030
  would be $2.8 trillion.
• GDP in 2019 would be 1.78 percentage points lower in 2019
  than the current projection.
• In 2019, each US household would lose the equivalent of
  $2,357, which also works out to a cost of about $915 per person.
  Through 2030, the study estimates that each household will lose
  just over $17,000 in spending power.
• If all trade actions hit concurrently, up to 2.75 million
  more workers would be unemployed compared to current projections,
  as companies slow their hiring plans and lay off current workers.
• The authors also estimate that the trade policies would force
  665,000 workers to find employment in other industries.

Not all of the trade policies modeled in the study have come to
pass. But Trump has recently suggested that many of those
scenarios could soon become a reality. For instance, the
president
told The Wall Street Journal in an interview on Monday that
it is “highly unlikely” the
US and China come to a deal to avoid an increase of the
current 10% tariff rate on $200 billion worth of Chinese goods to
25% come January 1.

Trump has also made more noise regarding the potential imposition
of auto tariffs in recent weeks. Officials from
the European Union and other major partners have warned that
retaliation similar to what Walmsley and Minor modeled
could become a reality if the president goes through with those
threats.

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Additionally, the authors’ findings line up with other
studies that have shown that the trade war could
harm US economic growth,
increase the number of jobless, and
cause prices to rise.

Trump is set to meet with Chinese president Xi Jinping at the G20
summit this weekend in a meeting that could set the stage for the
trade war’s path ahead.