Trump's trade policies would sink US into recession, study says

Trump's trade policies would sink US into recession, study says
© Getty

Donald Trump’s proposed policies on international trade would land a devastating blow to the U.S. economy and lead to the loss of millions of jobs, according to a new analysis.

The Republican presidential candidate’s plans to impose hefty tariffs on countries like Canada and Mexico would unleash a trade war and plunge the economy into recession, costing more than 4 million private-sector jobs, according to the analysis of the two candidates’ trade agendas by the Peterson Institute for International Economics.


Trump has said he would tear up existing trade agreements, renegotiate the North American Free Trade Agreement (NAFTA) and impose a 35 percent tariff on imports from Mexico and a 45 percent tariff on imports from China.

"His stated approach to the global economy of waging trade war and protecting uncompetitive special interests would be disastrous for American economic well-being and national security," according to the study authored by Marcus Noland, Tyler Moran and Sherman Robinson and Gary Hufbauer.

In the full trade war scenario, employment in 2019, which would represent the trough of the recession, falls by nearly 4.8 million private sector jobs, the report said. 

Sharply raising tariffs sharply on China, Mexico would severely affect export-dependent industries in the information technology, aerospace and engineering sectors and would seep into other sectors not directly involved in trade, such as wholesale and retail distribution and restaurants, the analysis showed.

"Millions of American jobs that appear unconnected to international trade — disproportionately lower-skilled and lower-wage jobs — would be at risk,” according to the study.

In fact, the analysis concludes that the protectionist trade policies proposed by Trump "would devastate viable American businesses and their vicinities," wrote Adam Posen, president of the Peterson Institute. 

"Backing out of the Trans-Pacific Partnership (TPP) agreement with our allies, as both candidates currently promise to do, would weaken our alliances in Asia, and embolden our rivals, thus eroding American national security," Posen wrote.

Both candidates are opposed to the TPP between the United States and 11 Pacific Rim countries.

The idea of curbing trade would only worsen the problem of the nation’s income stagnation by reducing purchasing power and slowing productivity growth.

“Furthermore, they would primarily hurt average American households on modest incomes, and especially many of the individuals and communities that were already hard hit by the crisis,” they said.  

Overall, the study said that the proposed trade policies of both candidates “would deeply harm the American economy."

But Democrat Hillary ClintonHillary Diane Rodham ClintonBiden faces do-or-die primary in South Carolina President Trump's assault on checks and balances: Five acts in four weeks Schiff blasts Trump for making 'false claims' about Russia intel: 'You've betrayed America. Again' MORE's position on trade would have a less profound effect on the economy even though it "would damage American well-being, primarily but not solely due to her stated opposition to TPP and to further economic integration."

Clinton "has expressed skepticism about trade but in effect represents stasis," the analysis said. 

In a legal analysis, Hufbauer argues that there is plenty of precedent and scope for a president to unilaterally raise tariffs as Trump has vowed to do.

"Any effort to block Trump’s actions through the courts, or amend the authorizing statutes in Congress, would be difficult and time-consuming," Hufbauer said.