Trade actions could reduce U.S. GDP by $365 billion

Current and possible tariffs could impact U.S. imports and exports valued at more than $1 trillion.    A report commissioned by a firm that represents Koch Industries contends that “together, current, proposed and potential trade actions by the U.S. and its trading partners could impact over $1.0 trillion of U.S. imports and exports.”
   The report, prepared by the Boulder, Colorado-based economics and trade analysis firm ImpactECON for Koch Companies Public Sector, says current and proposed U.S. trade actions under Section 232 and 301 of U.S. trade law, along with current and potential responses of U.S. trading partners, could reduce gross domestic product (GDP) by a projected 1.78 percent in 2019 — or $365.1 billion in 2017 dollars — and that households could suffer losses equivalent to $2,357 per household or $915 per person in 2017 dollars.
   It says U.S. tariffs “have impacted or threaten to impact over $1 trillion in U.S. exports and imports with tariffs averaging over 20 percent.” These include tariffs on $721.3 billion of U.S. imports and $334.5 billion in U.S. exports.
   “High economic growth in the U.S. will initially protect workers from unemployment; however, as more trade actions are initiated, and partners respond, increased unemployment could ensue. In 2019, we find that 2.75 million workers are likely to become unemployed if all trade actions are implemented concurrently. With the implementation of each additional trade action, underlying wage growth in the economy is diminished, increasing the probability that workers will become unemployed,” says a summary of the ImpactECON.
    It predicted “a high proportion of these job losses affect agricultural and low-skilled workers (e.g., workers in manufacturing where activity will slow due to higher costs for intermediate inputs into the supply chain caused by U.S. trade actions and its partners’ responses). In addition to those unemployed, we also project a further 665,000 workers will be displaced in 2019 and must find employment in new industries. By 2030, 1.07 million workers will be employed in a different sector, but for the trade actions.”
    The report looks at the effect of the aluminum and steel tariffs under Section 232 of the Trade Expansion Act of 1962, the tariffs on China based on Section 301 of the Trade Act of 1974, as well as the Section 232 investigation into U.S. imports of automobiles and parts that the U.S. Department of Commerce (DOC) has initiated as well as retaliatory tariffs by China and other countries.
    The report was released this week as President Trump prepares for the G20 meeting Friday in Buenos Aires, where he is expected to discuss tariffs with China President Xi Jinping. Trump has been critical of the conservative brothers Charles and David Koch, complaining earlier this year that they are “globalist” and “two nice guys with bad ideas.”
   ImpactECON says its report “shows a decline in real GDP of 1.25 percent by 2030, with the greatest losses occurring in production of oil seeds (soybeans), meats (pork and beef), coarse grains (corn, oats, sorghum), transport equipment (other than automobiles); chemicals, rubber, plastics and pharmaceuticals; textiles; and non-ferrous metals (aluminum).
    Reviewing the market outlook in Fiscal Year 2018-19 this week, the Japanese container shipping company ONE said shipping will have to adjust to fast changing trade flows in the near future. It laid out three possible scenarios that it said would be increasingly negative for the transpacific market:
   • If the source country of goods remains the same, ONE said container volumes could remain largely unchanged or TEU volumes could drop moderately.
   • If production of Chinese goods were shifted to other Asian countries such as Vietnam or Europe because of U.S. tariffs, volumes would likely be largely unchanged, but ONE said it was unclear if container shipping distances could remain similar or decrease, depending on where production was moved.
   • If production moved to North America, ONE said there would be a moderate to substantial drop in TEU volumes.