Apologies to Donald Rumsfeld. There may be some uncertainty relating to what elements of presidential proposals might be applied, particularly in mild of the need for Congressional approval. Nevertheless, one space the place legislative approval is just not required: tariffs
Within the desk beneath, see the objects outlined within the pink field.
Supply: Alec Phillips, David Mericle and Tim Krupa, “The Election and the Economy,” (Goldman Sachs, 3 September 2024).
We’ve 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 influence 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 are able to examine the influence of base case for GDP, underneath divided authorities (that’s, what Trump might do to tariffs with out Congressional approval). See the blue bars within the beneath determine (all 4 eventualities 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 international nation retaliation. In the event 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, lowering Chinese language imports of US items considerably.5 If nations all through the world increase their very own tariffs in response to Trump’s new tariffs, world financial headwinds will improve because the positive aspects from commerce diminish internationally. On the similar time, increased import prices will entail upward worth strain, risking stagflation.
Right here’s the image of US exports of products and providers through 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.
