The nonpartisan Congressional Budget Office said Wednesday that the White House’s trade policies, in particular its use of tariffs, has become a drag on economic growth and could cost families more than $500 a year.
The agency said that the tariffs enacted by the White House and retaliatory ones set up by the U.S.’s trade partners would reduce business investment and lower consumer spending, slowing down an otherwise strong economy.
“By 2020, in CBO’s projections, those tariffs reduce the level of real U.S. GDP by roughly 0.3% and reduce average real household income by $580,” the CBO concluded in its forecast for the next decade.
The CBO said that the higher costs created by tariffs were “reducing the purchasing power of consumers and increasing the cost of business investment.” It also said that uncertainty over how long the tariffs would last and whether new ones were coming was also problem because they were making businesses reluctant to make long-term investments.
This was dragging down an otherwise strong economy with low unemployment and rising wages. The CBO said that GDP grew by 2.5% last year and projected it would grow 2.3% this year. “The slowdown in growth this year largely results from slower growth of business fixed investment — that is, spending by businesses on equipment, nonresidential structures, and intellectual property products.”
The White House has placed $250 billion worth of goods from China under 25% tariffs and is scheduled to put an additional $300 billion worth of goods under 10% tariffs beginning on Sept. 1. The administration has also placed 25% tariffs on steel and 10% tariffs on aluminum. China has enacted retaliatory 25% tariffs on $120 billion of U.S. goods and halted purchases of U.S. agricultural goods.
