Janice R. Andrews
A recent analysis by the Peterson Institute for International Economics (PIIE) suggests that Donald Trump’s proposed tariffs on China could significantly impact the US economy. The study projects potential consequences including reduced economic growth, increased inflation, and substantial job losses, with effects potentially lasting until 2040.
Trump’s Economic Strategy
At a recent Georgia rally, Trump promised to revive American manufacturing by imposing broad tariffs on foreign goods, particularly from China. He argues this approach would protect American jobs and industries from foreign competition. Trump also emphasized plans to address illegal immigration and expand presidential control over the Federal Reserve.
PIIE Study Findings
The PIIE report examined two scenarios based on Trump’s proposed policies:
- Moderate Scenario:
- 1.3 million undocumented immigrants deported
- Tariffs implemented without foreign retaliation
- Federal Reserve independence compromised
- Projected outcomes by 2028:
- 2.8% decrease in US real GDP
- 2.7% fall in employment
- 4.1 percentage point increase in inflation
- Severe Scenario:
- 8.3 million undocumented immigrants deported
- Retaliatory tariffs from major trading partners
- Projected outcomes by 2028:
- 9.7% decrease in US real GDP
- 9% drop in employment
- 7.4 percentage point rise in inflation
- 28% increase in consumer prices compared to baseline
Both scenarios predict long-term economic challenges, with effects potentially lasting through 2040.
Global Implications
The study suggests Trump’s policies could have international repercussions, potentially reducing GDP in major US trading partners like Canada, Germany, Japan, and Mexico. A potential trade war could slow global trade, leading to worldwide inflation and reduced economic growth in key markets.
Contrasting Economic Visions
Trump’s campaign centers on job creation and manufacturing revival, resonating with voters in industrial states. However, the PIIE report suggests his policies might not achieve these goals without significant economic damage.
Vice President Kamala Harris, Trump’s opponent, advocates for a more nuanced approach to trade policy. She emphasizes practical economic solutions and targeted measures rather than broad tariffs.
Election Implications
As the US election approaches, economic policy remains a crucial issue. Voters will need to weigh Trump’s protectionist approach against Harris’s more moderate economic agenda, considering the potential long-term impacts on the US economy and global trade relations.
