What effects will Trump's tariffs have on the US economy?

Zakiya

What are the potential economic impacts of Trump's tariffs on the U.S. economy? Specifically, how might they influence domestic industries, consumer prices, trade relations, and overall economic growth in both the short and long term?

Subahdeep_Sahoo

I have written several articles on this subject for Quora already, but I will try the best I can to share my research. Those tariffs are a BAD IDEA from the very start. Trump suddenly comes up with an idea and then goes ahead without asking for advice or thinking things through. He is hard to work for (I am sure you realize this already, considering the unprecedented staff turnover) Some people get fired while others quit in exasperation, like Mattis - a great loss.

Trump began his presidency with this motto: TRADE WARS ARE GOOD AND EASY TO WIN. Not so. And, yes, they do hurt us in the long run. Let me give you a few examples. Trump placed a 25% tariff on steel and a l0% tariff on aluminum for Canada. Legally that could only be done ‘if Canada is not a security threat’. Of course, Canada is not a ‘security threat’ That hurt Canada, since they are the closest allies to the USA. Ms. Freeland came to Washington and exclaimed, “We are a ‘security threat’ Really?” This is going to change the entire deal we worked on so hard - auto etc. Trump claimed that Canada had a surplus of trade with the USA, which was not true. At any rate they worked and worked and finally two years later Trump had to agree that those tariffs need to be taken off. WISE??

The same thing happened with the EU. Merkel is not very happy with Trump. In a huge meeting she said, “We are proud of our volkswagon and we have a huge factory in the USA, and we are not a “Security threat’”. Everyone clapped and Ivanka was sitting there stunned. The EU wonders why Trump goes out of the way to please all the dictators of the world - especially Putin and is so hard on them. My relatives in Holland find it sick !! So Trump wanted to redo all the trade with the EU too. The Democratic leaders are doing all they can to work with Trump, but find it challenging. So there is the personal dynamic that gets hurt as well. ( Frankly, I do not appreciate Trump’s bullying style !!!)

Furthermore tariffs are a tax, and even though Trump says they bring in millions for the USA, that is not true. (By now we should all know that Trump does not always tell the truth so we need to check it out) The companies have to pay for them and that brings up the price for the consumer. It usually hurts both parties.

The World Trade Organization is very intertwined, and has been worked on for years, so you have to be careful before you start changing things. It is like do not tear down an old fence, until you know why it was put there.

Trump wants to bargain with each country separately. That gets very tricky. Plus he always wants to be the winner instead of being satisfied with a win-win situation.

From the perspective of quite a few financial experts, I have read on the subject, they say that China is actually the only country that CHEATS A LOT. But the best way to solve that is for all the other countries to put pressure on China collectively. The Trade War with China is costing us a lot !! We placed tariffs on them, so, of course, they retaliate. They investigated what would hurt Trump the most and found an area where there are a lot of Trump voters. As a result, the soya bean farmers of Iowa are hurting badly because China is not buying their products anymore. So Trump is subsidizing them in the amount of 16 billion, but it will not save the farmers. That trade will probably never come back. China has found other markets.

The fisheries are suffering as well because of the tariffs and will also need to be subsidized.

So all in all, this has not been a good strategy. The ruler of China refused to meet with Trump at the G-20 meeting in Japan until he promised that he will not place more tariffs on China. I have noticed that Trump is buttering him up. We will see what comes of it. When Trump needs you, he will be very nice to you, but as soon as you are no longer needed, he will discard you. In the long run that does not work well for international relationships the way it does not really work for him at home. The world is beginning to see the real Donald Trump.

Everyone thinks that Trump is this great DEAL MAKER. After all he wrote “The Art of the Deal”, but that is not true. The author feels guilty he wrote it, because he made it up. He went bankrupt l0 times and his father had to bail him out. Then after he had lost his father’s big inheritance, he went to Deutsche Bank known for money laundering and Russia saved his business. Putin has one over him. You can look it up on google.

I HOPE THE WORLD SOON LEARNS THAT TRUMP IS ‘THE WORLD’S GREATEST CONMAN.’

He would not be president if Putin has not helped him Read the second part of the Mueller Report. One thing that hurt me so much when at the end of the G-20 meeting and he was sitting with Putin, a reporter asked him, “Are you going to ask Putin to not interfere in the election again?” He grinned and said to Putin, “Do not interfere again, like it was some kind of joke.

Having done a lot of research, I know he was involved. He accepted Russian help gladly. He even said in a recent interview that that is just ‘research’

How I wish this criminal was impeached. spread the word.

David_Seidman

What everyone should be able to agree on is that they distort it. Under free trade, businesses buy raw materials wherever they want and make products wherever they want, which will in both cases be wherever it is cheapest. Consumers buy whatever they want wherever it is produced, and since they will want the cheapest price this will often be overseas. Once government puts its finger on the scale, you have for example manufacturers buying domestic steel at a higher price that that at which they used to buy it from China (because Chinese steel is now more expensive due to tariffs), so U.S. steel producers win and manufacturers who use steel lose. Collateral damage from Chinese retaliation means that American farmers lose because China is an important market for them. The government now has to subsidize the farmers. And so on. Distortion.

This is not to say that we were in a free trade environment before the Trump tariffs; all countries, including the U.S. already had various practices including tariffs restricting or conditioning access to their markets, but unless the tariffs lead to an agreement which eliminates some of the pre-existing trade barriers, their economic effect will be negative; higher prices for consumers and damage to certain U.S. businesses.

Abarna_Shanmugam

Negative short term, positive long term. Protectionism is a bad idea, but Trump tariffs are not protectionist actions. They are the form economic sanctions intended to change trade relations with each country trade tariffs applied to. They, obviously are not intended to affect the economy positively, as they have different purpose.

Andrew_John

Markets are complicated and are affected by many things, so it's not possible to be 100% certain but, previous presidents negotiated bad trade deals. Tarrifs on imports were low and tarrifs on our goods were high. It's like under-the-table foreign aid. Renegotiating those deals should free up markets for US goods. That, coupled with the return of manufacturing jobs is a big part of Trump's economic plan.

Hazel

While there are some “interesting” intellectual answers, there exists a reality that can’t be ignored: the stock market. As the market goes, so goes the economy, as has been demonstrated numerous times throughout history, and most recently, in 2007–2009.

The Dow is down 10%. Not a disaster, of course. Unless it’s a prelude to further declines. Two things about the stock market stand out to me.

The run-up of 2017 was pretty steep, and steep tends to be unsustainable. In the markets, such run-ups are called ‘parabolic’ for the reason that the growth seems almost exponential, and exponential growth can’t and doesn’t last. The run-up in January was even more steep, and these steep growth periods are often seen as ‘climax tops,’ where the expectation is that a sharp decline is likely to follow.
This is more subtle, but the P/E ratio of the S&P-500 is, week-over-week, above 25, sometimes above 26, and the P/E ratio on the Dow-30 is over 26. Historically, this is very unusual, and has only occurred three times in history, twice in the period around the 2000 (dot-com) crash and burn where the NASDAQ lost 75% of its value, and once, way back in the 1890s. These are ‘trailing P/E ratios,’ not some vague projection of what earnings might be in the future, so they’re real. The mean P/E ratio of the S&P-500 is closer to 15.
It’s the P/E ratio that particularly bothers me. For the S&P P/E ratio to get down to 15 would require about a 40% decline in the S&P, or astronomical, and sustained and sustainable earnings increases while the price of the S&P would have to remain in the current range for perhaps two to four years. Or some combination of the two.

I don’t know enough about world trade to comment as others have, but in all honesty, anytime someone says ‘we’re holding all the cards’ I suspect that’s more bravado than it is fact. The fact is, that whether they’re right or wrong doesn’t really matter. What matters is that the economy has seen a crack and the crack may grow. If the stock markets continue to decline, and my suspicion is that they will, then the economy will slow. A trade war right now is just not a smart thing to be doing as it will tend to exacerbate whatever crack in the economy we already have. Trade wars are long, protracted, and disruptive.

I disagree with the president on the matter of trade wars being ‘easily won.’ China deserves some respect here. China has been around for thousands of years, they’re patient and see things in terms of lifetimes rather than months, and Chinese businessmen are the businessmen of the far east in many countries, and they’re no pushover. To underestimate them would be a rookie mistake. To imagine that ‘we’ have something they can’t live without, naive. Exactly what raw materials do we have in the US that China can’t live without? Soy beans? That’s all you’ve got? Reality check: we need each other, and we both need to play nice.

I do not see this trade war turning out well at all. My best guess is that the stock market declines more than 20%, the economy sours, and unemployment raises its ugly head once again, following nearly nine years of declining numbers and rising new jobs. Trump inherited a pretty sweet situation when you look at the facts objectively. In one sense, to keep the ball rolling, all he had to do was not screw up. IMHO, this trade war is a major screw-up that will have far-reaching consequences.

Every decade it seems has its market crashes. As a student of the markets, I have charts that show this to be true. We have not had a crash in this decade - yet - but we are courting one. This will not turn out well.

Sonny

This very good question was asked by someone else two days ago. I don’t know if this is a problem, but I’ll re-post my answer from that other question. I hope this doesn’t violate any rules.

The US has already failed in this trade war. China has a managed economy, and is easily able to overcome this. The top Republicans, US corporations and economic experts warned Trump not to engage in this reckless and dangerous tariff obsession. Gary Cohn, one of the very few truly knowledgeable members of the Trump administration and a top economic expert couldn’t convince Trump to end this madness and walked off his job.

Consider it’s effect in undoing the long huge stock rally in the US for over a year. You know, that one funding your retirement plans! Early this year, we had an expected Correction, where overvalued and heated stocks resulted in a profit taking sell off. S and P 500 lost about 10% of their recent highs. Okay, expected and a natural process. Before long, the buy back happened and quickly, half of the losses were restored.

So what does Trump do? Starts threats of a tariff and praises the idea of a trade war with Europe, Japan, China, Canada and Mexico. The buy back ends, we go back into a Correction again, and since then, we’ve never got the Market back to what it was, only massive volatility instead where we can’t return to those past highs.

The only decent accomplishment Trump achieved, and now he sabotages it. He was pressured by threats from all our trading partners to back off tariffs and did for most, but keeps the tariffs on China and Japan. China has the worlds most trade relations and owns more than a trillion of our Treasury Debt; they don’t need us, we need them. Canada and Mexico, no longer trusting their former ally, have long started looking for new trading partners.

The Dragon is winning this one. The Eagle, a predatory bird and a symbol of America, is considering taking a vacation from his high post until we have a grown up in the White House again. One can only wonder what the Bear in Moscow thinks, but is probably laughing at us.