President Trump’s saving grace is the booming economy. But it’s officially clear that some of the president’s trade policies are undermining his best case for reelection.
This poses a big problem for Trump. After all, many voters are compelled by the strong economic growth, record-low unemployment, and rising wages we’ve experienced in part due to the president’s deregulatory agenda and pro-growth tax cuts. In fact, 56% of the public says their economic situation is “excellent,” and 57% say things are improving for them. For many, this is what makes the president’s errant tweets and boorish conduct worth it.
Yet a new Federal Reserve study documents the harmful impact of Trump’s trade war and reveals how it’s holding back the economy, weakening the president’s best pitch for a second term. In the trade war to date, the president has imposed tariffs on some $350 billion in products, largely targeting China, but also in some cases he has imposed tariffs on allies such as the European Union and Canada.
The study’s authors conclude that rather than help “protect American jobs” and put “America First” as intended, Trump’s trade policies have had the following results:
This is fancy jargon that pretty much means the tariffs have killed more jobs than they’ve protected and burdened consumers with higher prices. Trump waged this trade war specifically in an effort to protect American manufacturing, but the researchers examined the results this had in 2018 and found that it has, at least so far, totally backfired.
Which is to say, Trump’s tariffs have failed in the exact way tariffs have always failed, in the same way that basic economics has always predicted they would fail.
As the free-market economist and Nobel Laureate Milton Friedman wrote nearly 40 years ago, “The gains to some producers from tariffs and other restrictions are more than offset by the loss to other producers and especially to consumers in general.” And you can go back all to way to Adam Smith’s The Wealth of Nations, first published in 1776, and find the famed economist predicting that free trade will better serve the public than protectionism: “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them … it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest.”
The merits of free trade and failings of tariffs offer a rare point of agreement on which almost all economists concur. Of course, experts aren’t always right, but all signs show that on this one Trump should heed their warning.
It’s not too late for the president to wind down trade tensions and roll back barriers. If he does, it might just give the economy the juice it needs to put him over the edge in 2020.
