Apologies to Donald Rumsfeld. There’s some uncertainty concerning what components of presidential proposals might be applied, particularly in mild of the need for Congressional approval. Nonetheless, one space the place legislative approval will not be required: tariffs
Within the desk under, see the gadgets outlined within the crimson field.
Supply: Alec Phillips, David Mericle and Tim Krupa, “The Election and the Economy,” (Goldman Sachs, 3 September 2024).
We’ve got been down the Part 232 and Part 301 routes earlier than (232 is nationwide safety, metal and aluminum final time round; 301 is market entry, levied towards China). Right here’s the affect on efficient tariffs on core PCE stage.
Supply: Alec Phillips, David Mericle and Tim Krupa, “The Election and the Economy,” (Goldman Sachs, 3 September 2024).
When it comes to GDP, we will examine the affect of base case for GDP, underneath divided authorities (that’s, what Trump may do to tariffs with out Congressional approval). See the blue bars within the under determine (all 4 situations are right here).
Supply: Alec Phillips, David Mericle and Tim Krupa, “The Election and the Economy,” (Goldman Sachs, 3 September 2024).
The overwhelming majority of the impact on GDP development is because of tariffs – for which Trump 2.0 wouldn’t want Congressional authority.
What’s but extra terrifying is that the evaluation doesn’t incorporate overseas nation retaliation. Should you don’t suppose there could be retaliation, then you definately’re smoking one thing… From Clausing and Obstfeld:
After the Trump Administration considerably elevated tariffs on Chinese language items, China responded proportionately, decreasing Chinese language imports of US items considerably.5 If nations all through the world elevate their very own tariffs in response to Trump’s new tariffs, international financial headwinds will improve because the positive aspects from commerce diminish internationally. On the similar time, larger import prices will entail upward value strain, risking stagflation.
Right here’s the image of US exports of products and providers in the course of the Trump administration (however earlier than the pandemic-induced recession).
Determine 1: Exports of products and providers, bn.Ch.2017$ SAAR (daring black), 2016-17 log pattern (tan). Supply: BEA (NIPA), and writer’s calculations.
