New Nissan cars are driven onto a rail car to be transported from an automobile processing terminal. (Photo by Mario Tama/Getty Images)
President Donald Trump has imposed massive tariffs on U.S. trading partners and threatened many more. Several economists said last week that it’s difficult at this point to predict their impact on the economies of Ohio and other states.
But they did say that the tariffs will raise prices for consumers.
They added that the unpredictability created as Trump threatens, delays, and imposes tariffs makes it all but impossible for businesses to engage in the complex planning necessary to make major investments.
They also said that the promised result of the tariffs — bringing back sectors like Ohio’s diminished manufacturing — is a far more complicated proposition than imposing tariffs on a few commodities such as aluminum and steel.
While he has threatened far higher tariffs on some countries without following through, the ones Trump has imposed so far have been historic.
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“Tariffs are as high as they’ve ever been,” said Christopher Meissner, a University of California at Davis economist who focuses on global trade. “They are now about 18%, that’s the average tariff. That’s as high as they were during the infamous rise in the Great Depression in the 1930s with the Smoot Hawley Tariff. They’re about 10 times higher than they were just last year. They’re at historical highs. Not only that, they are coming with great amounts of uncertainty. Nobody knows what to predict in the short run, or even the medium run at this point.”
Meissner was speaking last week during a virtual press conference on tariffs hosted by SciLine, a service for journalists and scientists offered by the American Association for the Advancement of Science.
Negative impacts of the Trump tariffs appear to be manifesting. Core inflation surged last month, the job market was weak, and estimates for the two previous months were lowered.
The nonpartisan Tax Foundation estimates that over the long run, the Trump tariffs and the retaliatory measures they provoke will sap 1% in gross domestic product, cost nearly 1 million jobs, and cost the average household $1,500 next year. On the other hand, they’re expected to generate $2.3 trillion more in government revenue over the coming decade.
Meissner and the other panelists said that there are still many uncertainties — including how the unprecedented wave of tariffs will reshape the economy. But they said it’s certain they’ll be painful for consumers.
“The general lesson is that consumers are going to pay higher prices ultimately for imported stuff — and it will raise prices generally because of less competition,” Meissner said. “Tariffs generally just lead to higher prices for consumers.”
He explained how.
“Tariffs are taxes,” Meissner said. “They’re taxes on imports. But tariffs are taxes on exports, too. So when we put tariffs up, it doesn’t just reduce our imports, it’s going to inhibit our exports, so stay tuned for that.”
Jason Grant, an economist who focuses on agriculture at Virginia Tech, said that unlike the first Trump administration, countries being hit with tariffs have been slower to retaliate this time around.
Perhaps they’re hoping to work a better deal with Trump, Grant said. But if agricultural products are struck by retaliatory tariffs and other measures, it will be a big problem for Ohio farmers, he said.
“In terms of agriculture, Ohio is dependent on exports,” he said. “The risk is if these countries choose to retaliate… Our exports are dependent on foreign demand. If that foreign demand retaliates against U.S. products, that’s when Ohio farmers, Indiana farmers, Illinois farmers, all the way across to California — whatever form that retaliation takes, tariff or non-tariff — that’s what trickles back to lower cash to the farmers.”
Vidya Mani, who studies the economics of supply chains at the University of Virginia, said that new tariffs disrupt supply chains, which adds to inflation. Severe supply chain disruptions during the coronavirus pandemic have been blamed in large part for the rapid inflation that occurred starting in 2021.
“Tariffs are a shock,” Mani said. “Think of a railroad track that’s moving seamlessly from the West Coast to the East Coast, and then suddenly you put in stops. You add extra checks. The more stops you put in, the more it’s going to create delays.”
She added that because of the erratic nature of Trump’s tariff policy, businesses can’t plan strategically.
“If you have demand seesaw like this, and prices — one day they’re protected and they go up and the next day they’re not and they go down by a magnitude — no industry can survive a planned production based on those fluctuations,” Mani said.
For those reasons, and because it’s difficult to turn back the clock, the economists said it’s very unlikely that Trump will be able to use tariffs to restore sectors such as Ohio manufacturing to their earlier glory.
Meissner explained the complexity of the matter. Aluminum and steel tariffs might help companies that make those commodities. But they hurt all others that use them by making their inputs more expensive, he said.
“Because of the potential for uncertainty, for backtracking, it’s unlikely companies are going to pour investment into those sectors, and we wouldn’t necessarily be competitive in those sectors,” he said. “I think the idea that these tariffs are going to bring back or revitalize the economy in the way it was decades ago, I think that’s probably a non-starter.”