i3 - January/February 2019 - 72

Policy

By Charles Boustany

G U E ST B LO G

U.S. Tariffs are a Self-Inflicted
Error with Global Consequences

In the U.S. alone, Section 232 and 301
cost Americans $1.4 billion in tariffs since
the trade war started. Instead of hiring
new employees, fueling economic growth,
and investing money back into their businesses, American companies are paying
billions of dollars in new taxes.
Then, it got worse. That data does not
account for the most recent wave of tariffs that went into effect September 24,
which tax imports from China at a rate
of 10 percent. After months of tension,
on December 1, President Donald
Trump and Chinese President Xi
Jinping agreed to keep the trade war
from escalating by halting the imposition of new tariffs for 90 days as they
negotiate a lasting agreement. But the
rate could still increase to 25 percent in
March, meaning even more pain could
be on the horizon. Here at home, tariffs
are a pocketbook issue for consumers
paying higher prices and a challenge to
the bottom line for companies facing
higher costs for materials and goods, as
well as a loss of their overseas markets.
But the trade war has worldwide implications and will have a chilling effect on
the global business environment. In
Europe, overseas steel producers pinched
by American steel tariffs are dumping
products and undercutting European
steel companies. Europe's increase in
steel imports outpaced its increase in
demand by almost 17 times. That effect is
hardly limited to the steel industry.
The most troubling effect of the trade
war is the potential for both the U.S.
and China to see an economic decline at
the same time. China is already
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JANUARY/FEBRUARY 2019

on two of the world's largest economies.
The stock markets responded negatively,
signaling further instability for both the
U.S. and global economy. More than a third
of S&P 500 companies reporting third
quarter earnings have cited the impact of
tariffs. By late November, markets
fell below pre-2018 levels.
Businesses around the
world are already getting
squeezed by tariffs and the
pain will get worse. But the
hazards could strike at the
core of the global economy.
Analysts warn that the trade
war could cause wide-ranging
harm to financial markets.
Pantheon Macroeconomics
called tariffs "the quickest possible route to a recession."
CNBC's Jim Cramer warned
that the trade war will spark a
"mini version of 2008." And
Morgan Creek Capital founder
The most troubling
Mark Yusko sounded an alarm
when he said, "trade rhetoric is
effect of the trade war is
one of the dumbest things in
the potential for both the
the history of all administrations and it will cause a global
U.S. and China to see an
recession." CTA president Gary
economic decline at the
Shapiro also warned of a trade
same time.
war induced recession.
Tariffs might seem like a
convenient path to level the
trade playing field, but the evidence is
reporting slowing economic growth and
already in: they cause far more harm
the International Monetary Fund lowthan good. The U.S. and its global
ered its projection for next year's global
trading partners are already suffering
economic growth due to trade tensions.
from the self-inflicted wound of tariffs,
An analysis by UBS, a Swiss multinaand the worldwide economy will feel
tional investment bank, of the first wave
its effects unless the Trump adminisof tariffs called the decline in U.S.
tration changes course quickly.
imports from China "sharp and unambiguous." If rates are increased, it will be
even more painful for both the U.S and
Charles Boustany is a spokesperson for
China. The rate hike expected in March
the Tariffs Hurt the Heartland camif there is no trade truce between the
paign and a former Member of Congress
U.S. and China will be yet another drag
from Louisiana.
I T I S I N N O VAT I O N

Z_Wei/Getty Images

he Trump administration's first wave of tariffs on foreign
imports was a shot heard around the world. Those tariffs,
and the additional waves that followed, ignited a trade war
that is hurting the very people they're meant to help while also disrupting the global economy and business environment.

i3 - January/February 2019

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