How Trump‘s trade war will make things worse for working-class Americans

.story-content span,.story-content p,.story-content div{color:#000!essential;font-family:‘open sans‘,Arial!essential;font-size:15px!essential} span.p-content div[id^=”div-gpt”]{line-height:0;font-size:0}

President on imports by arguing that “unfair trade policies” have harmed American workers. This has led to a in which the US and have placed tit-for-tat tariffs on each different’s products.

Most recently, it’s ready to slap tariffs on US$60 billion in US imports if Trump goes ahead with his threat to tax another $200 billion of Chinese goods.

Since the president claims to be acting on behalf of working-class Americans, it’s fair to ask: How do tariffs actually affect them?

Scholars of political economy, such as , recognize that trade hasn’t always been good for poorer Americans. However, the economic fundamentals are clear: Tariffs make things worse.

Free trade and tariffs

The erosion of American manufacturing became a hot-button issue during the 2016 election. And for good reason. Total employment in manufacturing since 2001, placing about 4.5 million workers out of a job.

Members of that free trade is largely to blame for this decline. and are cited as evidence that trade no longer serves America’s interests.

The Trump administration’s solution is tariffs. In recent months, entry barriers have been erected, first to protect and in January and then in March.

Although he’s fighting these trade battles with many partners, including Canada and Europe, most of Trump’s attention is directed toward He claims that China , intellectual property and . Sweeping tariffs – beginning with a of Chinese imports – are an attempt to combat those issues.

Trump has said in tariffs are ready to go – and that he’s even to tax everything China sends to the US

Unfortunately, there are several reasons to think that tariffs will only harm those Trump wants to protect.

Tariffs raise prices for consumers

The purpose of a is to assist domestic companies.

Tariffs are a tax on imports. As taxes go up, so do the prices of foreign goods. Consider the Foreign imports of steel and aluminium became more expensive overnight – to the tune of 25 and 10 per cent, respectively. Higher prices drive down consumption of foreign goods while bolstering demand for domestic equivalents.

Unfortunately, protecting a few narrow industries can generate much broader costs. Not least, consumers now should look into pay more for everyday goods.

Trump’s tariffs on Chinese imports go far beyond steel and aluminium and affect a wide assortment of basic products, from consumer electronics to shoes and apparel.

That’s not a problem for higher earners who can absorb the further costs. But, for those with more limited incomes, who are especially vulnerable to increases, price hikes can quickly gobble up take-home pay.

Basic necessities such as make up a of working-class household expenditures when . And most of those products are imported. Foreign producers make up an overwhelming percentage of sales of many basic goods, such as . In fact, one manufacturing industry group that 80 per cent of Walmart’s suppliers are housed across the Pacific.

One estimated that a 10 per cent across-the-board jolt in tariffs on imported goods would cost the poorest 20 per cent of earners $300 a year.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with's FREE daily email newsletter.

That’s a imperative chunk of the by the poorest US households in 2015. Moreover, Trump’s first round of tariffs wasn’t the 10 per cent used in the study. They are 25 per cent.

And the president isn’t stopping there.

While the initially threatened a 10 per cent jolt on the next $200 billion of goods he’s targeting, raising that to 25 per cent.

Taken together, this means the real impact of tariffs on household incomes could be more than double earlier estimates.

Tariffs raise prices for companies

Tariffs also have negative consequences for American producers that rely on foreign inputs.

The metals tariffs, for example, mean that manufacturers of cars, aircraft and tractors all should look into pay more to produce their goods. Hence the to Trump from companies such as and . Their costs are now going up, endangering their competitiveness.

What this also means is that tariffs put jobs at uncertainty – far more than they assist protect.

Trump’s recent steel and aluminium tariffs were said to . But – 4.6 million – are employed in industries that rely on metals as a core input.

The comparison is even starker for solar panels. About directly manufacture solar panels in the United States. However, such as installation and maintenance. Those workers depend on a thriving solar market – a market that has since the tariffs.

If one wants to count jobs, the numbers simply don’t sum to a net benefit for the US economy.

Tariffs make it harder to do business abroad

Finally, trade protectionism is a two-way street.

wasted no time in responding to Trump’s tariffs, announcing duties of 15 per cent to 25 per cent on of US exports to China, mostly agricultural products. And if the war escalates, with some of the highest tariffs being put on food products.

Of season, targeting agrarian goods is a strategic decision. Agriculture is one of the United States’ few remaining export-oriented sectors. And, since China is the buyer of US agricultural exports, farmers are to retaliation. If a country wants to hit the US economy where it hurts, target agriculture.

China did precisely that, hitting US producers of soybeans, corn, poultry and beef particularly difficult. As a result, agricultural workers will find it more challenging to make a living in a sector where incomes the national average of all industries.

And poorer areas of the country will be harder hit than others. Three of the states that are the – Louisiana, Alabama and South Carolina – all have per capita incomes the national average.

That means that poorer households, in poorer states, face the greatest threat if export-dependent agricultural companies can’t do business with one of their most essential trade partners.

The bigger picture

This is not to say that removing all trade barriers and opening the US economy to all comers will solve the problems facing working-class and poorer Americans.

No one argues that trade is cost-free. Some industries inevitably contract due to foreign competition. And workers in those industries in the new jobs that are created.

But there’s something else that costs jobs, too: .

As tensions continue to escalate, poorer households, already , will face extraordinary downward pressure on their incomes. That’s bad news for the workers whom Trump promised to assist.

, Assistant Professor of Political Science,

This article was originally published on . Read the .

Leave a Comment