Trade Partnership Chief Stands by Finding That Tariffs Would Cause Big Economic Harm

Imposing new Section 301 duties on all remaining Chinese goods, coupled with those already in effect, plus retaliatory tariffs from China and the Section 232 tariffs on steel and aluminum, would cause a 1.01 percent annual hit to U.S. gross domestic product, said February's Trade Partnership report for the Tariffs Hurt the Heartland campaign. The research also found the tariffs and retaliatory duties would reduce the annual spending power of the average family of four by nearly $2,300 and risk a “one-time net impact” of nearly 2.2 million lost jobs. China will raise tariff rates June 1 on 5,140 tariff lines of U.S. goods in retaliation for the Trump administration’s hike Friday of the List 3 tariffs to 25 percent (see 1905090018), announced the Foreign Affairs Ministry Monday.

The Trump administration’s own research found those are “pretty wildly exaggerated numbers,” said Kudlow on Fox. “I would suggest if you go the whole boat” on tariffs, “we reckon it would be two tenths of 1 percent of GDP, so it’s a very modest number,” he said. “We have a $20 trillion GDP. In terms of possible job losses, we’re way, way below that job number.”

Any hit to the U.S. economy would be well worth the cost to curb China’s allegedly bad trade behavior, said Kudlow. “You gotta do what you gotta do,” he said. “We have had unfair trading practices all these years, and so in my judgment, the economic consequences are so small, but the possible improvement in trade and exports and open markets for the United States, this is worthwhile doing.”

When host Chris Wallace confronted Kudlow that Trump’s statements are “not true” when he says the Chinese pay the tariffs and not U.S. businesses and consumers, Kudlow said: “Fair enough. In fact, both sides will pay. The Chinese will suffer GDP losses and so forth with respect to a diminishing export market.” On Wallace’s challenge that U.S. businesses and consumers pay the higher tariffs as taxes on imported Chinese goods, Kudlow replied: “Yes, to some extent. I don’t disagree with that.”

So Kudlow “agrees the tariffs will have a negative impact on the US economy,” emailed the Trade Partnership’s Baughman Sunday, defying Kudlow to release his methodology showing why the economic hit won't be so bad. “Without seeing how he baked his cake to get to ‘de minimis,’ I can't comment on the size of his negative impacts.”

In her group’s February study, “I can say that we took a careful, balanced approach, capturing gains and losses and the comprehensive potential impacts of the tariffs,” said Baughman. The study “structured the model to match as nearly as possible the current state of the US economy,” she said.

The Trade Partnership’s “approach” and methodology are “described publicly,” said Baughman. “The administration should release its study so we can see the cake's ingredients.” The White House didn’t comment Monday.

The model in the Trade Partnership study simulated the "percentage changes in aggregate economic measures, including U.S. real GDP and aggregate employment," that would result from the imposition of tariffs, said the report's "methodology in detail" section. The estimates on "net" employment impact "take into account potential increases as well as decreases in employment as demand increases in some cases for U.S. products, and declines in others."

China isn't increasing tariffs on U.S. imports that haven't yet been part of retaliation. It's hiking the previously imposed punitive tariffs from 10 percent to 20 percent or 25 percent, and increasing other tariffs from 5 percent to 10 percent. The largest number of products, 2,493, are going from 10 percent to 25 percent; another 1,078 are going from 10 percent to 20 percent, and for 974 tariff lines, the retaliatory tariff will increase from 5 percent to 10 percent. China is also holding fast at 5 percent on 595 tariff lines.