The Trade Question Mark

By at 27 March, 2019, 12:26 pm

Image by Gerd Altmann from Pixabay

by Raymond J. Keating-

The biggest question mark when it comes to policy and the U.S. economy is trade. And the latest report from the U.S. Bureau of Economic Analysis highlights the resulting problems.

Exports (seasonally adjusted) were up slightly in January compared to December. January’s monthly exports came in $207.3 billion, which was off from the $212.9 billion in May 2018.

Meanwhile, imports were off in January versus December, and have been on a general decline since October — $267.2 billion in October versus $258.5 billion in January.

Hiking U.S. tariffs, of course, raises costs for U.S. consumers and businesses of all sizes, while threatening to impose additional tariffs creates uncertainty about future costs.

Small businesses are affected given that increased tariffs or quotas raise costs. Keep in mind that more than 55 percent of U.S. imports serve as some kind of inputs for businesses, and retaliatory measures by other nations reduce opportunities.

CNBC reported the results of a new study from Federal Reserve Bank of New York, Princeton and Columbia universities:

“The study found that U.S. businesses and consumers saw ‘substantial increases’ in the price of goods throughout last year, including a ‘complete passthrough’ of U.S.-imposed tariffs onto imported items. The economists — the New York Fed’s Mary Amiti, Princeton professor Stephen Redding and Columbia professor David Weinstein — also said Americans suffered by a lack of import variety and disruptions to supply chains.”

In addition, it was noted:

“The authors found that while losses were accumulating at a rate of $1.4 billion per month by November, total losses from January through November ballooned to a conservative estimate of $6.9 billion. That number may be too low, the economists said, because their model assumes that the U.S. government uses tariff tax revenues to offset the welfare burden.”

Given the positive changes on the tax and regulatory fronts experienced during 2017 and 2018, removing harmful tariffs would remove a major question mark for consumers, small businesses and investors. In addition, more time and energy by the Administration focused on advancing trade agreements would add another major positive in the policy mix for economic growth.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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