Trump’s Tariffs Will Shrink the Economy and Reduce Investment, CBO Says
President-elect Donald Trump’s proposed tariffs would result in higher prices, lower economic growth, less investment in the United States, reduced productivity by American workers, and fewer exports.
On the other hand, they would marginally reduce the federal budget deficit.
Those are the trade-offs presented in a Congressional Budget Office (CBO) report analyzing Trump’s campaign trail promises to slap higher taxes on just about everything that Americans buy from abroad—with extra high taxes on goods imported from China. The CBO’s report echoes findings from several non-governmental reviews of Trump’s agenda, but it represents the first time that a federal entity has outlined the trade-offs involved.
And those trade-offs skew heavily towards costs, rather than benefits.
An increase in tariffs of 10 percent on all imports would reduce America’s gross domestic product (GDP) by about 0.3 percent, while 60 percent tariffs on all imports from China would knock GDP down by another 0.3 percent, the CBO projects.
Meanwhile, the tariffs would “make consumer goods and capital goods more expensive, thereby reducing the purchasing power of U.S. consumers and businesses,” the CBO found. The productivity of American businesses would decline due to “limiting competition from imports and causing resources to be used less efficiently than they otherwise would have been used.”
The higher tariffs would lower the budget deficit by about $2.7 trillion over the next 10 years, the CBO also estimated. In other words, American consumers would be paying $2.7 trillion more in federal taxes over the next 10 years if Trump’s tariff plans are implemented—regardless of whatever other changes to the federal tax c
Article from Reason.com
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