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Economist Just Proved Trump’s Claims About An Improved Economy To Be Complete BS

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President Donald Trump has spent much of his two years in office moaning about China and making the totally ridiculous claim that America, despite being the richest country in the world, is somehow being taken advantage of by other countries through trade. He has waged a damaging trade war which he says is good for America but is clearly not. However, we have just learned for the first time just how awful this is going to be for the future of our economy. Economist Paul Krugman explains:

On Saturday economists from Columbia, Princeton, and the New York Federal Reserve released a paper, “The impact of the 2018 trade war on U.S. prices and welfare,” that used detailed import data to assess the tariffs’ impact. (The paper, by the way, is a beautiful piece of work.) The conclusion: to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it. And the losses to U.S. consumers exceeded the revenue from the new tariffs, so the tariffs made America poorer overall. How did they get this result? The U.S. government collects data on the prices and quantities of many categories of imports. Many of these categories faced new tariffs, but many others didn’t.

So you can compare what happened to the tariffed imports to the de facto control group of untouched imports; this tells you the impact of the tariffs. Under Trump’s vision, in which foreigners would have paid the tariffs, what you would have expected to see is falling prices for tariffed goods, offsetting the tariff, so that consumer prices didn’t change. What you actually see, however, is no visible effect of the tariffs on import prices. So foreign suppliers don’t seem to have absorbed any of the tariffs, which were fully passed on to consumers; tariff-inclusive prices (Figure 1) have risen by the full amounts of the tariffs.

These price hikes led to substantial changes in behavior. Imports of the tariffed items fell sharply, partly because consumers turned to domestic products, but also in large part because importers shifted their sourcing to countries that aren’t currently facing Trump tariffs. For example, a number of companies already seem to have begun buying goods they previously bought from China from Vietnam or Mexico instead. These changes in behavior are the key to the paper’s conclusion that the tariffs have made America poorer.

This is real, material harm to the bank accounts of American citizens as a direct result of Trump’s policies. How long before he wakes up to this?


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