The proposals by Republican presidential front-runner Donald Trump to slap trade tariffs of 35 percent and 45 percent on China and Mexico, respectively, would dramatically stifle U.S. economic growth and cost 1.4 million jobs over the next four years, according to a new analysis by Oxford Economics, a global consulting and research firm.
“Using our global economic model, we estimate that imposing high trade tariffs on China and Mexico — and likely retaliatory tariffs — would lower both the level of real GDP by 1.6 percent and employment by 1.4 million by 2020 than we otherwise forecast,” Kathy Bostjancic, the group’s U.S. director of macro investors services, said in a statement sent to The Daily Caller.
The long-dormant issue of inflation could also return. “Sharp increases in tariffs would push the inflation rate up to 3.5 percent by 2020,” Bostjancic warned.
Additionally, the imposition of tariffs would cause the United States to breach its existing trade agreements and violate World Trade Organization regulations.
Trump appears unfazed.
“I don’t mind trade wars when we’re losing $58 billion a year,” he said — referring to Mexico — in a Feb. 25 debate, according to Reuters.
Oxford Economics noted that Trump is far from alone in proposing protectionist trade policies. Other presidential candidates have responded in the same way — to varying degrees — to the growing disillusionment with free-trade policies among American voters.
Democrat Bernie Sanders has similarly called for the elimination of free trade agreements.
Hillary Clinton, the Democratic front-runner, says she opposes the Trans-Pacific Trade Partnership, a trade agreement among several Pacific Rim countries as well as the United States and Mexico. The agreement — 7 years in the making — is currently pending U.S. congressional approval.
Clinton, who strongly supported the Trans-Pacific Trade Partnership as President Barack Obama’s Secretary of State (and whose husband, Bill Clinton, presided over passage of the North American Free Trade Agreement), now says she doesn’t think the trade agreement protects American jobs sufficiently.
Republican presidential candidate [crscore]Ted Cruz[/crscore] says he also opposes the Trans-Pacific Trade Partnership.
Republican John Kasich is the only remaining top-tier presidential candidate who continues to support the Trans-Pacific Trade Partnership. Kasich has also promised to negotiate aggressively for more desirable terms in future trade agreements.
Bostjancic, the Oxford Economics analyst, notes that free trade is one of the few concepts that unites virtually all Western economists.
“While within a country there will be segments that are adversely affected by increased foreign competition, overall increased trade activity lifts countries’ prosperity,” Bostjancic said.
She observed that the negative effects of protectionist policies from the 19th and 20th centuries — the Smoot–Hawley Tariff Act, for example — “clearly show how damaging protectionism is.”
Bostjancic also noted that, while the economic benefits of free trade are wide and visible, “recent empirical evidence shows that the negative impact on affected workers is greater than theory suggested.”
Oxford Economics suggests that policymakers should seek practical solutions to help workers who are negatively affected by both foreign competition and advances in technology.
Oxford Economics, founded in 1981, is a global analysis and consulting firm which was developed in cooperation with the business college at Oxford University.