President Trump's tariffs led to job losses in the manufacturing sector and higher prices for producers and consumers, new report finds.
One of the biggest casualties has been manufacturing jobs. The labor market advantage conferred by protectionism was more than outweighed by the combination of higher input costs and retaliatory tariffs, Flaaen and Pierce said.
Some American manufacturers were able to boost their domestic market share, but the trade-off was higher production costs, since tariffs were applied on many foreign-made industrial inputs and raw materials, as well as reduced competitiveness in foreign markets. Tariffs have made American-made products more expensive — and less competitive — overseas in two ways. Higher input costs played a role here, as did the tit-for-tat retaliatory tariffs imposed in response by other countries.
The new Fed report also said it “does not explicitly consider the effects of increased uncertainty about future trade policy.” Economists blame that uncertainty for a sharp decline in corporate capital investment, even though companies were left flush with cash after the 2017 tax cut.
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