Gary Cohn is still no fan of President Trump’s tariff plans. A few months removed from his position as director of the National Economic Council, the former Goldman Sachs COO can speak as freely as he wants about the potential dangers of Trump’s new trade policies.
In a Washington Post interview on Thursday, Cohn expressed his concerns: “I’ve always been worried that trade can have a derailing effect on the U.S. economy. If you start putting tariffs on products that consumers buy, they’re going to buy less products.” Cohn, who announced his resignation as Trump’s chief economic adviser in March, often butted heads with the president on trade policy.
When asked about a prospective trade war with China and our G-7 allies, the former director outlined a more concerning outcome than what is optimistically promoted by the White House:
“If you end up with a tariff battle, you will end up with price inflation. You could end up with more consumer debt. Those are all historic ingredients for an economic slowdown,” he said, adding, “You want to continue to have low prices, higher wages, more consumption, more savings, get the savings rate up — those are all the things you’d like to see. Everything we’re talking about is the opposite of that.” Cohn warned that an escalation of tariffs could eliminate the benefits of Trump’s signature achievement, the tax reform bill.
Cohn has good reason to believe that tariffs could cause serious harm to the economy. A recent report by the economic consulting firm Trade Partnership Worldwide estimates that a 25 percent tariff on automobile imports alone would cost 157,000 jobs. Another study by the Washington-based Tax Foundation estimates that $37.5 billion in tariffs would result in a net loss of 79,000 full-time jobs.
Despite Cohn’s warnings, it seems entirely implausible that Trump will change his mind on tariffs after his recent G-7 summit drama. For the president, a focus on the alleged unfairness of trade deficits trumps all other considerations:
Why should I, as President of the United States, allow countries to continue to make Massive Trade Surpluses, as they have for decades, while our Farmers, Workers & Taxpayers have such a big and unfair price to pay? Not fair to the PEOPLE of America! $800 Billion Trade Deficit…
— Donald J. Trump (@realDonaldTrump) June 11, 2018
This is unfortunate for Trump, whose recent rise in approval ratings is at least partially due to increased economic growth. If tariffs dampen this development, the president may have a tougher time championing the benefits of tax reform and economic growth heading into the 2018 mid-terms and his 2020 re-election campaign.
As Trump now plans to enact tariffs on billions of dollars of Chinese imports, one would hope he has considered all the costs. And with a former advisor untethered from the constraints of public office, Trump would be wise to look at Cohn’s warnings as a valuable counter to his protectionist tendencies, if only from a distance.
Cole Carnick is a commentary intern with the Washington Examiner.
