Trump Tariffs Hurt U.S. Manufacturing, Cost American Jobs: Federal Reserve Economists

The "small positive effect" of U.S. tariffs was more than offset by rising import costs and retaliatory tariffs, their paper concludes.

President Donald Trump’s trade war and his “unprecedented” increase in tariffs on foreign imports hurt the very sector he intended to boost — manufacturing — and cost American jobs, concludes a new paper by Federal Reserve Board economists.

The academic paper also suggests the trade war approach fails to recognize the sophisticated interconnection of global supply chains that also benefits U.S. companies.

“We find that tariff increases enacted in 2018 are associated with relative reductions in manufacturing employment and relative increases in producer prices,” the economists concluded.

While Trump’s tariffs did reduce competition for some industries in the U.S. market, this “small positive effect” was more than offset by rising costs that U.S. companies (and consumers) had to pay for imports and by retaliatory tariffs, the paper found.

“While the longer-term effects of the tariffs may differ from those that we estimate here, the results indicate that the tariffs, thus far, have not led to increased activity in the U.S. manufacturing sector,” according to the research.

The paper noted that U.S. manufacturing employment and output increased at a “robust pace” in 2017 through much of 2018. But since late last year, manufacturing output “declined noticeably and manufacturing employment growth has stalled.”

U.S. industries hurt most by retaliatory tariffs sparked by Trump’s trade war included leather goods; aluminum sheet, iron and steel; motor vehicles; household appliances; audio and video equipment; and computer equipment, the paper said.

The economists didn’t measure how uncertainty over U.S. trade policy affected business confidence, which can also have a significant impact on the economy. Many economists believe that worries about unsettled policy were the primary driver of a downturn in business investment this year, Marketwatch reported.

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