President Donald Trump has embarked on an unorthodox follow-up to cutting the taxes American families pay: raising the prices of goods they buy.
Higher prices will result directly from tariffs the White House plans to impose on steel and aluminum imports from allies such as Canada, Mexico and the European Union as well as other countries. The White House acknowledges that effect, while arguing the price increases will be tiny.
But combined with additional tariffs against other imports from China and retaliatory steps by our trading partners, the measures Trump announced promise to make an impact. And mainstream economists across the political spectrum agree it will be negative.
"Unambiguously bad," said Douglas Holtz-Eakin, a Republican economist who advised President George W. Bush. "The only question is how big."
"Anything that's manufactured — prices will rise," added Mark Zandi, an independent economist at Moody's Analytics.
Zandi estimated the net effects of trade conflicts Trump has initiated at 0.2 percent in reduced economic growth, 250,000 in lost jobs, and $210 in higher costs for an average family. Such a reduction in growth would wipe out half the projected boost in growth from the tax cuts Trump and the GOP Congress enacted last December.
Trump concedes his trade policies will cause "a little pain." But he insists that 25 percent steel and 10 percent aluminum tariffs will benefit the country by boosting the domestic manufacturing of building-block products crucial to economic vitality and national security.
His argument collides with 21st century economic reality in multiple ways.
First, the number one source of U.S. steel imports is Canada, the closest of economic and national security allies. An indignant Prime Minister
Second, as past tariff experiences have shown, jobs lost in industries that pay more for steel and aluminum inputs (think cars and beer cans) will far outnumber those gained from tariff protection for steel and aluminum manufacturing.
Third, counter-tariffs by trading partners will damage American export sectors such as agriculture — exports that disproportionately benefit Trump-allied heartland states represented by fellow Republicans. Sen. Ben Sasse of Nebraska, echoing other GOP lawmakers, observed simply, "This is dumb."