Do rates protect American jobs and industry? Economists say no

President Donald Trump has spoken of rates such as a job -confirming colossus.

Rates will “create jobs as we’ve never seen before,” Trump said Tuesday during a joint session of the congress.

Economists do not agree.

The tariff policy even has that Trump has pursued since he took on the opposite effect, they said.

“It costs American jobs,” said Mark Zandi, chief economist of Moody’s.

He categorized rates in general imposed as a ‘loss loss’.

“There are no winners here in the trade war that we are apparently flooded,” said Zandi.

The Trump government has announced a barrage of rates since the inauguration day.

Trump has imposed an extra duty of 20% on all input from China. He set 25% rates for import from Canada and Mexico, the two largest trading partners in the US. (Only a few days after those were in force, the president delayed taxes on some products for a month.)

Rates of 25% on steel and aluminum will come into effect on Wednesday, while tasks on copper and wood and mutual rates for all US trading partners could be in the not too distant future.

There is a deceptively simple logic for the protective power of such an economic policy.

Rates are usually intended to help us compete more effectively with foreign competitors, by making it more expensive for companies to find products from abroad. American products look more favorable, giving support to the domestic industry and jobs.

There are indications for such benefits for targeted industries.

Steel rates during Trump’s first term, for example, reduced the import of steel from other countries by 24%, on average, according to 2018 to 2021, according to a 2023 Report by the American International Trade Commission. They also increased American steel prices and domestic production, each with about 2%, according to the report.

New steel rates that come into effect on March 12 would also “probably” Shannon O’Neil and Julia Huesa, researchers from the Council on Foreign Relations, “raise” written In February.

Higher prices would probably benefit American producers and add jobs to the current workforce of the steel industry, around 140,000, they said.

Although the protection of rates can “illuminate” that “enlighten” the American industry, it comes with a cost, Lydia Cox, an assistant professor of economics at the University of Wisconsin-Madison and international trading expert, wrote in a 2022 paper.

Rates create higher input costs for other industries, making them “vulnerable” for foreign competition, Cox wrote.

These overflow effects harm other sectors of the economy, which ultimately cost jobs, said economists.

Take steel for example.

Steel rates increase production costs for the production sector and other steel-intensive American industries, such as cars, agricultural machinery, household appliances, construction and oil drilling, O’Neil and Huesa wrote.

Cox studied the effects of steel rates imposed by former President George W. Bush in 2002-03 and discovered that they were responsible for 168,000 fewer jobs in steel industries, on average more jobs than there in the entire steel sector.

Rates are a “pretty bone instrument,” Cox said during a recent webinar for the Harvard Kennedy School.

They create “a lot of additional damage,” she added.

Such damage includes retaliation rates imposed by other countries, making it more expensive for exporters in the US to sell their goods abroad, said economists.

Rates imposed during the first term of Trump-Op products such as washing machines, steel and aluminum healing according to A August 2019 $ 290 billion of US entry with an average rate of 24%, according to a 2020 paper Published by the US Federal Reserve. Those taxes eventually translated into a rate of 2% for all American exports after taking into account foreign retaliation, it turned out.

“A tax tax is effective on exports”, Erica York, senior economist at the Tax Foundation, written Last year for the Cato Institute, a libertarian think tank.

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Damage to the American economy of those first Trump rates “” clear “was many times” more than the wages of newly created jobs, economists Larry Summers, former finance minister during the Clinton administration, and Phil Gramm, a former US Senator (R-Texas), wrote in a recent Wall Street Journal on.

(President Joe Biden Kept the most from Trump’s rates in place.)

American trading partners have already started fighting Trump’s recent rates.

China brought rates of up to 15% on many American agricultural products – which are the largest American exports to China from Monday. Canada too Set $ ​​21 billion From retribution rates for American goods such as orange juice, peanut butter, coffee, appliances, footwear, cosmetics, motorcycles and paper products.

President Trump referred to the potential economic pain of his rate policy during his speech to the congress.

“There will be a little disturbance, but we are good at that,” he said. “It won’t be much.”

Although many economists do not yet predict an American recession, Trump does not exclude the possibility of a decline in a Fox News interview on Sunday because rates are taking effect – although he said that the economy would benefit in the long term. If a recession would happen, it would also weigh on protected sectors, economists said.

Voters chose President Trump with a mandate to set up an economic agenda that includes rates, said Kush Desai, a spokesperson for the White House, in an e-mail statement.

“Rates played a key role in the industrial climb of the United States that extend to the 19th century by the presidency of William McKinley,” said Desai.

There is a historical precedent for the trade war that breaks out: the 1930 Smoot-HaWley rate, which caused a reduction in export and did not increase agricultural prices for the farmers trying to protect it, wrote Michael Strain, director of economic policy studies at the American Enterprise Institute, written in a conservative, written in a conservative, written in a conservative, in a conservative, in-tank stank, in a conservative institute, in an institute, institute. Think tank, in a conservative think tank, wrote in one 2024 paper.

Economists also believe that the Smoot-Hawley rate has worsened the great depression.

Although an almost centuries old economic policy does not necessarily indicate what will happen in the modern era, protectionist policy from the post-2017 year-such as smooth-hawley-“disappointing results,” Strain wrote.

Proof in recent years suggests that protectionism can harm the employees who want to help, Strain said.

The first rates of Trump, for example, reduced the total employment in production by a net 2.7%, Aaron Flaaen and Justin Pierce, economists of the Federal Reserve Board, written In 2024. After taking into account a boost of 0.4%, that is for employment in production paths that are protected by rates, they found.

The Trade War of 2018-19 “did not succeed in breathing new life into domestic production” and reduced jobs in the broad production sector, Strain wrote.

The share of American employment that comes from production paths has fallen since the end of the Second World War, largely because technological progress has increased the productivity of employees, Strain said. It would be more useful to send the direct economic policy to connect employees with jobs of the future, he said.

“Trade – such as technological progress – is disturbing, but attempts to bury the American economy in Amber are no useful answer,” he written.