Trade dispute costing US billions, 2 studies find

By Ai Heping | China Daily Global | Updated: 2019-03-06 23:52

One study says that cost to US companies, consumers was $4.4 billion a month in 2018

Two new studies by economists contradict US President Donald Trump's claims that China is paying the US billions of dollars in the form of tariffs, with both saying American consumers and companies are paying, and one study put the cost at $4.4 billion a month last year.

Tariffs initiated by Trump — about $283 billion worth on American imports — were passed on to consumers in higher prices on imported goods in the first 11 months of 2018, according to economists Mary Amiti of the Federal Reserve Bank of New York, Stephen J. Redding of Princeton University and David Weinstein of Columbia University.

In a tweet on Feb 16, Trump reiterated what he has previously stated: "Billions of Dollars are being paid to the United States by China in the form of Trade Tariffs!''

But the study by the economists says the trade battle cost US consumers and companies $3 billion per month in additional tax costs and another $1.4 billion a month to companies in efficiency losses as they changed the way they do business to adapt to the tariffs, such as creating new supply chains, the study found.

Prices went up, as expected, disrupting supply chains and budgets, according to the paper, published on Saturday by the London-based Centre for Economic Policy Research (CEPR).

The economists said that tariffs had already reduced incomes in the US by nearly $7 billion, and that the total cost to the economy had been even larger, because of price increases.

Weinstein of Columbia University told China Daily that if the tariffs against China are lifted, the deadweight losses —the $1.4 billion per month — will stop accruing, but the past deadweight losses will not be made up. "Those efficiency losses are permanent,'' he said.

He told Bloomberg that "it's pretty unclear that this trade war is a net win for the economy at this point".

In a separate paper published on Sunday, four other US economists also came to the same conclusion: that US consumers and companies were paying most of the costs of the tariffs.

The economists also said that after factoring in retaliation by other countries, the main victims of Trump's trade war tariffs had been US farmers and blue-collar workers in areas that supported Trump in the 2016 election.

"Workers in very Republican counties bore the brunt of the costs of the trade war, in part because retaliations disproportionately targeted agricultural sectors, and in part because US tariffs raised the costs of inputs used by these counties,'' the authors wrote.

Their study found that the annual loss from the higher cost of imports alone for the US economy was $6.4 billion, or 0.03 percent of GDP.

That study was done by Pinelopi Goldberg, the World Bank's chief economist and a former editor-in-chief of the American Economic Review, Pablo Fajgelbaum of UCLA, Patrick Kennedy of the University of California, Berkeley and Amit Khandelwal of Columbia University.

Economists at the Institute of International Finance last week calculated that Chinese retaliatory tariffs alone were causing roughly $40 billion a year in lost US exports.

Nancy Kong in New York contributed to this story.