LOUISVILLE, Ky. (WDRB) -- President Donald Trump’s tariffs, aimed at boosting the economy, have instead done the opposite, at least for manufacturers, according to an analysis by the Federal Reserve Board.
The Fed said that the tariffs raised prices for manufacturing companies and decreased employment in the sector.
“For manufacturing employment, a small boost from the import protection effect of tariffs is more than offset by larger drags from the effects of rising input costs and retaliatory tariffs,” the authors wrote.
The Trump administration has imposed tariffs primarily on China to combat what Trump and U.S.-based companies have said are unfair trading practices that include the forced sharing of intellectual property and the Chinese government propping up its domestic manufacturing companies.
Trump has said that trade wars are easy to win, and he said this year that the tariffs are working “big time.”
“Every country on earth wants to take wealth out of the U.S., always to our detriment. I say, as they come,Tax them. If they don’t want to be taxed, let them make or build the product in the U.S. In either event, it means jobs and great wealth,” Trump tweeted this summer.
However, at least when it comes to the manufacturing sector, the tariffs appear to have backfired, according to a 33-page report from economists Aaron Flaaen and Justin Pierce, of the Federal Reserve Board’s Divisions of Research & Statistics and Monetary Affairs.
Flaaen and Pierce said the effectiveness of tariffs to promote domestic manufacturing is undermined by the presence of "globally interconnnected supply chains.”
“While the potential for both tit-for-tat retaliation on import protection and input-output effects on the domestic economy have long been recognized by trade economists, empirical evidence documenting these channels in the context of an advanced economy has been limited,” they wrote. “We find the impact from the traditional import protection channel is completely offset in the short-run by reduced competitiveness from retaliation and higher costs in downstream industries.”
You can read the report here.
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