Trump tariffs led to job losses, higher prices for businesses: Fed report

A new report examines the short-term effects of retaliatory tariff in the trade war with China

Tariffs intended to boost the U.S. manufacturing sector have instead led to job losses and higher prices for businesses, according to a recent Federal Reserve report.

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The report linked retaliatory tariffs issued in 2018 and 2019 with a 1.4 percent reduction in manufacturing employment and a 4.1 percent increase in costs for producers that more than offset the positive effects. It's the "first comprehensive estimates of the effect of the recent tariffs on the U.S. manufacturing sector," according to the Fed.

"We find that the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices," the authors, Aaron Flaaen and Justin Pierce of the Federal Reserve Board, wrote.

“While one may view the negative welfare effects of tariffs found by other researchers to be an acceptable cost for a more robust manufacturing sector, our results suggest that the tariffs have not boosted manufacturing employment or output, even as they increased producer prices.”

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CHINA TO CUT IMPORT TARIFFS, OPEN MARKETS

But things could still turn around, the report noted. Some of the job declines and cost increases may be linked to businesses caught in limbo by agreements with suppliers and customers already in place when the tariffs were added.

“These results necessarily represent short-term effects of tariffs, and the longer-term implications of trade tensions may differ from those estimated here,” the report states.

Douglas Holtz-Eakin, president of the nonprofit American Action Forum and a former director of the nonpartisan Congressional Budget Office, was optimistic about the coming year. He said Sunday during an interview on “America’s News Headquarters” with Ed Henry that drops in investment and trouble in housing markets appear to be turning around.

“I don’t see a lot of negatives on the horizon,” Holtz-Eakin said. “I see the potential for growth, perhaps even faster.”

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