July 21, 2018 1:49 pm
Updated: July 22, 2018 9:09 am

Experts: Donald Trump’s tariffs likely to hurt U.S. economy rather than benefit American workers, companies

WATCH: As global trade tensions continue to increase, experts weigh in on what a trade war is and whether or not protectionism and imposing tariffs have ever worked to boost domestic jobs.


With President Donald Trump intensifying his rift with U.S. trading partners, economists are growing more doubtful that any deal that might benefit American workers and companies is in sight.

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Instead, many analysts say they expect the Trump administration to impose more tariffs on China and potentially other key U.S. trading partners. With those nations almost certain to retaliate, the result could be higher prices for Americans, diminished export sales and a weaker U.S. economy by next year.

READ MORE: Donald Trump says he’s willing to slap tariffs on every single Chinese product the U.S. imports

In an interview with CNBC that aired Friday morning, Trump renewed his threat to ultimately slap tariffs on a total of $500 billion of imports from China – roughly equal to all the goods Beijing ships annually to the United States. The president has already imposed tariffs on $34 billion in Chinese goods, and Beijing has retaliated with tariffs on an equal amount of American exports. The White House has also itemized $200 billion of additional Chinese imports that it said may be subject to tariffs.

WATCH: Canada warns the U.S. it will strike back if it imposes tariffs on the Canadian auto industry

In addition, Trump has told the Commerce Department to investigate whether imported autos and auto parts threaten America’s national security – the same justification the president invoked to impose tariffs on steel and aluminum. If the answer is yes, the administration says it could slap 20 per cent to 25 per cent tariffs on $335 billion of auto imports. Higher car prices for American consumers would inevitably follow.

Analysts say they’re becoming more convinced that Trump’s multi-front trade fights aren’t merely a short-term negotiating ploy. Rather, he may be prepared to wait as long as he feels it necessary to force other countries to adopt trade rules more favourable to the United States.

READ MORE: U.S. auto industry predicts soaring car prices and job loss if Trump tariffs imposed

“People are underestimating what we’re headed for,” said Rod Hunter, a lawyer who served as a White House economic adviser under President George W. Bush. “He’s been saying since the ’80s that trade deals are bad and we should have more tariffs, and that’s what we’re getting.”

Moody’s Analytics estimates that if the tariffs were imposed on autos and most Chinese imports and other countries retaliate as expected, annual U.S. growth would slow by 0.5 percentage point by mid-2019. It expects that 700,000 jobs would be lost.

Global markets have remained generally calm despite the eruption of a full-blown U.S.-China trade war and the other conflicts Trump has ignited. On Friday, the Dow Jones industrial closed down slightly.

WATCH: IMF warns G20 leaders that tariffs will harm global economy

“I’ve been surprised that up until now, markets seem overly sanguine about the risks” of a trade war between the world’s two biggest economies, said David Dollar, senior fellow at the Brookings Institution and a former official at the World Bank and U.S. Treasury Department.

Investors as a whole appear to accept the argument of Trump economic advisers, notably Larry Kudlow and Kevin Hassett, that the president’s threats will likely force China, the European Union, Canada, and Mexico to eventually negotiate better trade deals.

READ MORE: Canadians still flocking to the U.S. in spite of trade war

But many analysts are skeptical that Trump’s tactics will produce such an outcome. Rufus Yerxa, president of the National Foreign Trade Council and formerly deputy director general of the World Trade Organization, said Trump appears to think that America’s trading partners will yield to pressure without securing any concessions in return.

“That isn’t how trade negotiations work,” Yerxa said.

China will likely retaliate if additional tariffs are imposed, economists note, rather than simply knuckle under. President Xi Jingping “cannot lose face with his own people by giving in to the United States,” Dollar said.

Philip Levy, a trade expert at the Chicago Council on Global Affairs and a former White House trade adviser, suggested that Chinese officials have been frustrated and confused by their previous failed efforts to reach an agreement.

READ MORE: What a trade war is, how it works, and why it will impact Canada

After Beijing offered this spring to buy more natural gas and farm goods from the U.S. to narrow the trade deficit, Treasury Secretary Steven Mnuchin said the trade war was “on hold.” China also said it would reduce its auto tariffs from 25 per cent to 15 per cent.

Yet Trump soon intensified his tariff threats anyway.

WATCH: How steel tariffs are affecting farm machinery buying intentions

“The Chinese are not clear what the United States wants,” said Scott Kennedy, who studies the Chinese economy at the Center for Strategic and International Studies. “They’ve received conflicting messages depending on who they speak with.”

The administration says it wants China to end the theft of intellectual property from U.S. companies and curb policies that require American and other foreign businesses to hand over technology in exchange for access to the Chinese market. Yet any such agreement would require extensive talks over how it would be implemented and verified.

WATCH: How the U.S.- Canada trade war on tariffs is eroding our economic relationship

“There’s no negotiating going on that I can see,” Dollar said.

In the CNBC interview that aired Friday, Trump reiterated his complaints about America’s gaping trade gap with China, even though reforming China’s technology policies wouldn’t likely narrow the trade deficit.

“We are being taken advantage of, and I don’t like it,” Trump said.

Economists note that Trump’s hard-nosed stance on trade runs deep. He has been denouncing other countries’ trade practices and urging retaliation for decades, dating to the 1980s, when Japan was regarded as America’s main global economic threat.

“You have to take seriously that (imposing tariffs) is what he really wants to do,” said Adam Posen, president of the Peterson Institute for International Economics.

WATCH: U.S. Vice President Mike Pence: America is back and we’re just getting started

In his CNBC interview Friday, Trump shrugged off the prospect that a trade war with China could cause the stock market to tumble.

“If it does, it does,” he said.

© 2018 The Canadian Press

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