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National Security or Insecurity? Trump Tariffs Will Cost 195K to 624K Jobs

PIIE estimates Trump tariffs will cost 195,000 to 624,000 jobs depending on how countries retaliate.

The Department of Commerce initiated a national security investigation on auto and parts products on May 23. Findings and recommendations are due by mid-February 2019 but could be issued much sooner.

PIIE, the Peterson Institute International Economics says Trump's Proposed Auto Tariffs Would Throw US Automakers and Workers Under the Bus.

President Trump is reportedly considering raising US duties to 25 percent on all imports of automobiles—including SUVs, vans, and trucks—and auto parts, invoking the same national security law recently used to impose tariffs on steel and aluminum. A new PIIE analysis shows that if he did this, production in these industries would fall 1.5 percent and cause 195,000 US workers to lose their jobs over a 1- to 3-year period or possibly longer. The US auto and parts industries would shed 1.9 percent of their labor force. The analysis assumes there would be no exemptions for any country (or even for North American Free Trade Agreement [NAFTA] partners, as in the steel and aluminum cases). The potential trade action would affect more than $200 billion in US imports.

If other countries retaliate in-kind with tariffs on the same products, production would fall 4 percent, 624,000 US jobs would be lost, and 5 percent of the workforce in the auto and parts industries would be displaced (table 1). This second scenario would also hurt US exports of these products more than imports. The aggregate effects on the US economy in either scenario would be small.

Jobs Lost

Both scenarios demonstrate how reliant the domestic industries are on imported parts, or intermediate inputs, that are not produced in the United States or that have no easy US-made substitute. Tariffs would raise the cost of these parts and domestic production, which makes products more expensive to consumers and lowers demand for them in the United States and abroad. Consumers could expect to see prices rise for both imported and domestically produced vehicles.

US Auto Exports

US auto exports total $51.1 billion.

Truck exports are another $15.1 billion, nearly all of it to Canada.

Tweet to Think About

How Stupid is This?

Damn stupid.

The knock-on impacts, which the PIIE did not estimate, are likely to be as important, if not more important

Instead, let's portray it as "Winning".

Why Do This?

As a matter of national security, we allegedly need to harm the US auto sector.

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Mike "Mish" Shedlock

If fewer things will be made overseas, then fewer troops will be stationed in other countries.

Its possible Trump can use tariffs to build a more vertical national economy, though the heyday of the bluecollar worker is finished, such a move would make it easier for the Fed and the USG to manage our economy. The degree of interdependence in the global economy is dangerous to stability, and creates a moral hazard where investors no longer have control over which governments and businesses they are using. In turn agreements such as Kyoto are really shams, but remain necessary in order to prevent us from constantly seeking out the least regulated (and hence morally and environmentally polluting) resources on the planet. In short if you must compete with prison labor you become a prisoner yourself.

The EU was created to help avoid the economic conflicts and break the cycle of war on that continent. The premise being that trade partners are more likely to remain peaceful allies. From a communication theory viewpoint, not knowing what another nation is doing creates a great deal of international stress so we spy on each other. There were of course no troops in the ME before the Iraq invasion so with the development of the C31 having troops overseas is no indication that war is more likely.

“Academic theory predicts that decades of these policies should have made the Chinese much poorer, and US citizens much better off. “

No even half respectable “Academic theory,” nor other “theory,” for that matter, “predicts” any such thing. The single most fundamental “theory” (more like inevitability, but the idiots insisting economics is in some ways beholden to empirical verification will never quite grasp that one…) of economics, is diminishing returns. Low hanging fruit gets picked first. Then things get progressively harder.

When Mao left China, the Chinese had nothing. Americans had everything. Both only slightly exaggerated for effect. “Any” policy on the Chinese side even the tiniest bit less wealth destructive than Maos, would allow the Chinese to get closer in wealth to Americans.

What “Academic theory predicts,” is that those starting from the same spot, will benefit from trading more freely and with less restrictions. IOW, wrt China, that the two freer parts, Taiwan and Honk Kong, would be wealthier than the less free PRC. That’s all.

Companies paying more to source product, possibly not being able to obtain it, lost export opportunities. Who in their right mind believes this would not crimp the economy?

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