Since I worked for 30 years for U.S. farmers as a trade economist for USDA, I want to comment on the recent trade news.
Tariffs increase inflation because they are paid to the United States Government (USG) by the U.S. importer, whether a domestic manufacturer or retailer like Ford or Walmart, and then added totally or partially to the consumers’ or business’ costs. The conservative Cato Institute reports that many studies found that U.S. consumers bore nearly the entire cost of tariffs imposed during Trump’s first term. The New York Federal Reserve found that tariffs imposed then on imports from China cost the average American household about $830 per year. Annual inflation during Trump’s first term rose from 1 to 2 percent, contrary to Trump’s claim that there was no inflation.
Current studies estimate that Trump’s tariffs imposed this month on China and threatened on Mexico and Canada (the last two suspended until at least early March), will cost an average family annually between $900 (Goldman Sachs) to $1200 (Peterson Institute). Chinese products affected include auto parts, electronics, toys, clothing/shoes, and Canadian/Mexican products include gasoline, cars, lumber, and groceries.
This is bad news for Adams County residents already struggling with the high cost of living. And significantly, studies show that tariff protection results in few new jobs, with many current jobs lost to retaliation on our exports from our trading partners. So overall U.S. national income will likely drop due to these actions. Now Trump is putting high tariffs on steel, meaning domestic producers will raise prices. Trump’s new slogan should be: Make America Poor!
Trump asks why the U.S. runs a big trade deficit (higher imports versus exports). It’s because Americans consume much more than they produce, which is reflected in our low savings/income rate, only 4% vs 11% in Germany. A strong U.S. dollar also encourages imports because it makes imports cheaper. Americans like cheaper products.
Trump loves his “beautiful” tariffs because they provide revenue to the USG. Trump and Congressional supporters know that given yearly USG budget deficits running at $1.9 trillion, tariffs will provide $100-150 billion/year of revenue; but this is small compared to Trump’s renewal of his tax cuts costing $460 billion/year, and likely additional tax cuts (costing $100-200 billion/year) and higher spending for deportations and the military ($100 billion/year).
Trump added $8 trillion to the USG debt in his first term. Expect much more debt.
David Young, Gettysburg
Thanks for your work with the USDA and how it helps inform us regarding the tariffs imposed today on Canada and Mexico.