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Fed study finds Trump tariffs backfired
By Greg Robb of Market Watch. Excerpts:
"“We find that the 2018 tariffs are associated with relative
reductions in manufacturing employment and relative increases in
producer prices,” concluded Fed economists Aaron Flaaen and Justin
Pierce, in an academic paper.
While the tariffs did reduce
competition for some industries in the domestic U.S. market, this was
more than offset by the effects of rising input costs and retaliatory
tariffs, the study found.
“While the longer-term effects of the
tariffs may differ from those that we estimate here, the results
indicate that the tariffs, thus far, have not led to increased activity
in the U.S. manufacturing sector,” the study said.
Tit-for-tat
trade retaliation is an idea best relegated to the past, given the
presence of globally interconnected supply chains, the Fed researchers
found.
The top ten manufacturing industries hit by foreign
retaliatory tariffs were producers of: magnetic and optical media,
leather goods, aluminum sheet, iron and steel, motor vehicles, household
appliances, sawmills, audio and video equipment, pesticide, and
computer equipment.
The top ten industries hit by higher prices were: aluminum sheet,
steel product, boilers, forging, primary aluminum production, secondary
aluminum smelting, architectural metals, transportation equipment,
general purpose machinery and household appliances.
The
researchers don’t measure the effects on business confidence resulting
from the uncertainty regarding U.S. international trade policy. Many
economists see this doubt about future government policy as a primary
driver in the decline in business investment this year.
While the
Federal Reserve did not specify companies affected by the U.S - China
trade dispute of the past 18 months, semi-conductor and electronics
manufacturers that depend on China for sales, like NVIDIA Corp.
NVDA, +1.28%,
Micron Technology
MU, +0.11%
and Intel Corp.
INTC, +0.39%
are seen as especially vulnerable in a trade war scenario.
Apple Inc.
AAPL, +0.04%
has been able to escape tariffs on its China-assembled phones to date.
While Chinese consumers mostly buy locally made automobiles, U.S. manufacturers like Tesla Inc.
TSLA, +0.06%
have been at risk. The
electric vehicle maker first raised the price of its Model S and Model X
cars by $20,000 after a new round of trade tariffs but then cut and
decided to absorb the difference. However, together with its Chinese
partners, General Motors
GM, +0.44%
sold 3.6 million vehicles in China in 2018, more than in the United States.
Some executives have blamed import tariffs for higher costs including heavy equipment manufacturer Caterpillar
CAT, +0.11%."
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