Ball State economist: Trump’s tariffs could cost Indiana’s economy dearly, could lead to recession
A trade war brewing as a result of tariffs imposed by President Donald Trump could significantly hurt Indiana’s economy, particularly the steel, aluminum, soybean and corn sectors, according to Ball State economist Michael Hicks.
In the policy statement, “Selected Tariff Effects on Indiana” (included at the end of this article), he estimates initial job losses in Indiana of roughly 6,000 by the end of 2018, rising to 14,000 in 2019, and declining through 2025 to just under 11,000 jobs. The GDP effect ranges from a loss of $668 million in 2019 to $560 million by 2025.
“Using very conservative estimates of the total employment and price effects, our model suggests small but meaningfully damaging effects to the Indiana economy, which will begin to manifest themselves over the coming weeks,” said Hicks, director of Ball State’s Center for Business and Economic Research. “These estimates suggest these tariff levels are sufficient to reduce employment by 0.4 percent from where it would have been by mid-2019 and reduce GDP by some $670 million, or roughly 0.23 percent by the end of next year.
“This is relatively large, as it is about 10 percent of all GDP growth expected for 2018-19. This more than erases all the benefits of the Tax Cut and Jobs Act that Congress passed a few months ago.”
Hicks noted that the U.S. is in the early stages of what appears to be a rapid escalation in tariff proposals with effects throughout the world.
“These tariffs are more than sufficient to threaten the U.S. economic recovery, which began in summer 2009,” Hicks said. “The full tariff regime threatened by the U.S., the EU, China and Canada are sufficient to move the economy into recession in late 2018 or 2019. Fortunately, given the very rapid adjustments to trade policy, the likelihood of any tariff proposal surviving for more than a few weeks is very low.”
[pdf-embedder url=”https://duboiscountyfreepress.com/wp-content/uploads/2018/06/TariffsIndiana-20180621.pdf”%5D
Professor Hicks keyword is “could”. The tariff negotiations are a complicated issue. The U.S. has the lowest tariffs on average in the world, yet when we ship to China, the EU or other parts of the world we see tariffs imposed from 10-50% on American made goods. The EU puts a 10% tariff on US made cars while the US has a 2.5% tariff on EU made cars. Germany ships 500K cars a year to the US for a whopping $25B in sales and the EU tariffs are so high, the US made cars generate $1.2B per year in sales. Harley Davidson has a 25% tariff on motorcycles shipped to the EU. U.S. designer clothing and apparel have a 30% tariff in the EU.
China not only imposes tariffs but also steals U.S. companies technology. President Trump is in the process of negotiating new trade deals to reduce tariffs and allow foreign customers an opportunity to own U.S. made products at a better price point. Right now the US is in a position of strength and should negotiate hard for better trade terms. For decades, politicians have allowed foreign governments to benefit from these unfair trade deals. Let the president negotiate hard. The deal, he inks, could benefit the US economy for future generations.
http://www.pewresearch.org/fact-tank/2018/03/22/u-s-tariffs-are-among-the-lowest-in-the-world-and-in-the-nations-history/
http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_152998.1%20Trade%20in%20goods%20and%20customs%20tariffs.pdf
Daryl Hensley, Jasper