2018 tariffs meant job losses, higher prices for U.S. manufacturing sector
President Donald Trump’s strategy to use import tariffs to protect and boost U.S. manufacturers backfired and led to job losses and higher prices, according to a Federal Reserve study released this week.
“We find that the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices,” concluded Fed economists Aaron Flaaen and Justin Pierce, in an academic paper.
While the tariffs did reduce competition for some industries in the domestic U.S. market, this was more than offset by the effects of rising input costs and retaliatory tariffs, the study found.
“While the longer-term effects of the tariffs may differ from those that we estimate here, the results indicate that the tariffs, thus far, have not led to increased activity in the U.S. manufacturing sector,” the study said.
Tit-for-tat trade retaliation is an idea best relegated to the past, given the presence of globally interconnected supply chains, the Fed researchers found.
The top ten manufacturing industries hit by foreign retaliatory tariffs wereproducers of: magnetic and optical media, leather goods, aluminum sheet, iron and steel, motor vehicles, household appliances, sawmills, audio and video equipment, pesticide, and computer equipment.
The top ten industries hit by higher prices were: aluminum sheet, steel product, boilers, forging, primary aluminum production, secondary aluminum smelting, architectural metals, transportation equipment, general purpose machinery and household appliances.
The researchers don’t measure the effects on business confidence resulting from the uncertainty regarding U.S. international trade policy. Many economists see this doubt about future government policy as a primary driver in the decline in business investment this year.
While the Federal Reserve did not specify companies affected by the U.S - China trade dispute of the past 18 months, semi-conductor and electronics manufacturers that depend on China for sales, like NVIDIA Corp. NVDA, -0.97%, Micron Technology MU, -1.95% and Intel Corp. INTC, +0.43% are seen as especially vulnerable in a trade war scenario.
Apple Inc. AAPL, -0.04% has been able to escape tariffs on its China- assembled phones to date.
Fed study finds Trump tariffs backfired
Published: Dec 28, 2019 8:41 a.m. ET
2018 tariffs meant job losses, higher prices for U.S. manufacturing sector
President Donald Trump’s strategy to use import tariffs to protect and
boost U.S. manufacturers backfired and led to job losses and higher prices, according to a Federal Reserve study released this week.
“We find that the 2018 tariffs are associated with relative reductions in
manufacturing employment and relative increases in producer prices,”
concluded Fed economists Aaron Flaaen and Justin Pierce, in an academic
paper.
While the tariffs did reduce competition for some industries in the domestic U.S. market, this was more than offset by the effects of rising input costs and retaliatory tariffs, the study found.
“While the longer-term effects of the tariffs may differ from those that we estimate here, the results indicate that the tariffs, thus far, have not
led to increased activity in the U.S. manufacturing sector,” the study said.
Tit-for-tat trade retaliation is an idea best relegated to the past, given
the presence of globally interconnected supply chains, the Fed researchers
found.
The top ten manufacturing industries hit by foreign retaliatory tariffs
wereproducers of: magnetic and optical media, leather goods, aluminum sheet, iron and steel, motor vehicles, household appliances, sawmills, audio and
video equipment, pesticide, and computer equipment.
The top ten industries hit by higher prices were: aluminum sheet, steel
product, boilers, forging, primary aluminum production, secondary aluminum
smelting, architectural metals, transportation equipment, general purpose
machinery and household appliances.
The researchers don’t measure the effects on business confidence resulting from the uncertainty regarding U.S. international trade policy. Many
economists see this doubt about future government policy as a primary driver in the decline in business investment this year.
While the Federal Reserve did not specify companies affected by the U.S -
China trade dispute of the past 18 months, semi-conductor and electronics
manufacturers that depend on China for sales, like NVIDIA Corp. NVDA, -0.97%, Micron Technology MU, -1.95% and Intel Corp. INTC, +0.43% are seen as
especially vulnerable in a trade war scenario.
Apple Inc. AAPL, -0.04% has been able to escape tariffs on its China-
assembled phones to date.