Trade war is costing Americans $3 billion a month

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President Trump often touts that his tariff approach to trade is working, but two new studies show it is U.S. consumers and companies taking the biggest hit.

In two separate papers published this week, some of the world’s leading trade economists declared Trump’s tariffs to be the most consequential trade experiment since the 1930 Smoot-Hawley tariffs blamed for worsening the Great Depression.

American consumers have been saddled with $69 billion in added costs because of the tariffs the U.S. imposed last year, including on $250 billion of Chinese imports as well as levies on steel and aluminum, according to a study released by four economists working on a National Science Foundation grant, according to The Wall Street Journal.

In a study published on Saturday, economists from the Federal Reserve Bank of New York, Princeton University and Columbia University found that tariffs imposed by Trump last year on $250 billion in Chinese imports were costing U.S. companies and consumers $3 billion a month in additional tax costs and companies a further $1.4 billion in deadweight losses, according to a Bloomberg report.

The tariffs also were causing the diversion of $165 billion a year in trade, leading to significant costs for companies having to reorganize supply chains.

That study, and another sponsored by the Centre for Economic Policy Research, concluded that tariffs gave U.S. producers the ability to raise their prices when the tariffs were imposed on foreign competition, according to WSJ. Those foreign companies raised their prices, too.

“We find that the U.S. tariffs were almost completely passed through into U.S. domestic prices,” said the Centre for Economic Policy Research paper, written by economists from the Federal Reserve Bank of New York, Princeton University and Columbia. “The entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters.”

Over the past several weeks, American and Chinese negotiators have been in almost constant contact over phone and video conferencing to hammer out the terms of a deal, according to The New York Times.

China has agreed to drop the retaliatory tariffs it imposed to counter Trump’s levies on $250 billion worth of Chinese goods and to provide greater access to its markets for cars, beef, chemicals and other products.

A tariff détente would help large and small companies that have struggled under the weight of 10 percent and 25 percent levies, but the trade war has already come at a cost.

Several recent studies have shown modest but growing damage to the United States economy from the trade war, including the retaliatory tariffs other countries have leveled against American exports.

Economists say tariffs have already reduced incomes in the United States by nearly $7 billion, and that the total cost to the economy had been even larger, because of price increases. By the end of last year, they estimate, the tariffs were costing consumers and importers a total of nearly $4.5 billion a month.

That price might be worth it if the administration makes a deal that substantively transforms Chinese industrial policy and gives American companies fair and reciprocal access to the Chinese market.

“We oppose the use of tariffs, period,” Myron Brilliant, the executive vice president and head of international affairs at the U.S. Chamber of Commerce, told The New York Times. “But we are at the same time supportive of this administration trying to get a deal that is not just consequential for today but will have lasting impact on the relationship and put the U.S.-China relationship on a better track.”

“Absent a deal, I think everyone loses,” he added.


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