The Trumponomics tariff policies will likely go down in history as one of the worst economic experiments ever levied on the American public. Some economists are estimating it will be equivalent to the largest tax increase on the American people in history. The trickledown theory behind Reaganomics has been widely discredited but Trumponomics is likely to make that look like an act of genius. The havoc Trump’s tariff wars have unleashed on the global economy in just the past few weeks is really unprecedented. And the full effects have yet to be felt.
Shipments out of China are already being canceled. According to the freight company, HLS Group, there have already been 80 cancelled sailings1. Each of these canceled sailings represents containers that will not be reaching American ports. A decrease in the number of shipping containers handled by American ports will ultimately result in a need for fewer dock workers which will lead to layoffs. Fewer containers will adversely impact the number of trucks (teamsters ) that are needed. In short it will disrupt the entire supply chain, and the ripple effect will be felt across the country.
China is the world’s largest importer of soybeans. After the first trade war with the Trump administration, China began expanding its soybean imports from Brazil. Brazil now accounts for almost 70% of the soybean imports to China. The US makes up most of the difference. However, in the current trade war, China has implemented higher tariffs on US soybeans and has actually suspended the licenses of three US soybean exporters. With the additional tariffs China has implemented on other agricultural products in response to Trump’s tariffs, the agricultural communities in middle America are going to be hurt.
The US actually has a trade surplus with China for services but that too is now under attack due to Trump’s trade war. China has initiated anti-trust investigations into Dupont and Google. They are restricting exports of rare minerals to the US and requiring Chinese companies to get special licenses for such exports. China has ordered companies to stop accepting all deliveries of Boeing aircraft and aircraft parts and related equipment from U.S. companies.
The bottom line is that these trade wars will have far reaching and painful consequences for almost everyone involved. In Trump’s first trade war with China, economists estimate it cost the American public about $80 billion which was equivalent to a huge tax increase on the American people. This is shaping up to be far worse because not only is Trump attacking China, but virtually every other country in the world. Current estimates are that these tariffs will cost the average American family an additional $4,000 to $4,500 a year. That is a huge financial hit for all but the wealthiest Americans.
Prices will increase. Layoffs will occur. Supply chains will be disrupted. There will be no winners. Even if some manufacturing does return to the United States, it will take years and millions of dollars to make that happen and in all likelihood, those factories will be highly automated so the net increase in American jobs will be minimal. But probably the most important long-term consequence of this blunderbuss approach to economic policy is that America’s standing and stature in the world will not likely recover any time soon. The entire world no longer views America as a trusted partner. Trust that has been built up over decades has been shattered in a few months.
Today’s world is a complex and dangerous place. It is a place where we need strong alliances and trusted partners. But now, thanks to Trump, America is unlikely to be first or great, but we will surely be alone.
