While the stock market is swinging with the Dow’s drop of 600 points earlier this week, then rallying 300 points today when hearing tariffs on automobiles may be delayed, what is the long-term effect of these gyrations on the U.S. economy?
The Tax Foundation, a Washington-based policy research group that supports a simpler tax code, determined that all tariffs announced this far, fully imposed, would hurt the U.S. GDP by .75% ($188 billion), offsetting half of the long-run impact of the sweeping tax overhaul passed in 2017.
Further, according to the group’s latest report, if all tariffs are enacted, it would mean a loss of a half million jobs. President Donald Trump has announced he will raise tariffs to 25% from 10% on $200 billion worth of imports from China and may raise the tariffs to 25% on $325 billion more in imports from China.
The stock market was cheered up Wednesday with a potential delay of auto tariffs, which alone could hurt GDP by .45%, according to the Tax Foundation, as well as result in 0.29% lower wages and 347,988 fewer full-time jobs.
The foundation states that “the Trump administration has so far imposed $72 billion worth of new taxes on Americans by levying tariffs on thousands of products.” Trump continues to say the U.S. is receiving money from those tariffs and has an additional $15 billion bailout for farmers (on top of the $12 billion he ordered in 2018).
However, the Tax Foundation states in its report, “Historical evidence shows that tariffs raise prices and reduce available quantities of goods and services for U.S. businesses and consumers, which results in lower income, reduced employment, and lower economic output.” Further, the U.S. dollar may appreciate.
Products currently affected by the tariffs on China include washing machines, steel and aluminum, and solar panels. The foundation writes that “In March 2018, President Trump announced the administration would impose a 25% tariff on imported steel and a 10% tariff on imported aluminum. If 2018 imports equal 2017 levels these tariffs could cost U.S. firms nearly $9 billion.