Pub. 15 2018 Issue 3

17 Issue 2 • 2018 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S The consensus among economists is that tariffs can create benefits for a few industries, but there are far more losers than winners. When consumers are forced to pay higher prices for goods, then they will inevitably participate less in the economy, which is one of the main factors that leads to a recession. Most econo - mists, both right and left-leaning, seem to agree that protectionism on a large scale is an archaic line of thinking in today’s global economy. Trump’s 25% tariff on imported steel and 10% tariff on imported aluminummay provide a temporary boost to those industries, but are the more long- term price increases on cars, appliances, packaged food, etc. worth it? The consen - sus overwhelmingly seems to be no. On September 17th, the President an - nounced that he’s imposing 10 percent tariffs on $200 billion worth of Chinese imports and will expand the tariffs to 25 percent beginning January 1st. China has already vowed to retaliate and, if they do, it would add penalties to an ad - ditional $267 billion in Chinese imports. This is on top of the $50 billion in tariffs imposed on Chinese imports, includ - ing steel and aluminum. These tariffs will inevitably lead to an increase in the price of Chinese goods. It’s import - ant to note that 23 states count China as their top source of imports and 45 states include China in their top three. These price increases will likely have a negative effect on American consum - ers. Simply put, a trade war between the world’s two largest economies could have devastating consequences on the global economy. The President continually talks about America’s trade deficit with Chi - na, but it’s important to discuss why this deficit exists. According to the U.S. Census Bureau, the deficit “was $375 billion in 2017. The trade deficit exists because U.S. exports to China were only $130 billion while imports from China were $506 billion.” China can produce consumer goods at much lower costs than other countries can because of several factors. One, there is far lower standard of living in China than in the United States, so compa - nies can pay workers far lower wages. Two, the exchange rate is partially fixed to the dollar. If history is any indicator, these tariffs will raise the prices of consumer goods while not providing the widespread increase in jobs that they are intended to. These tariffs could also speed up even more automation, as opposed to actually providing jobs. If there are more jobs to fill, what’s stopping a company from simply automating them as opposed to hiring actual workers? We don’t have a trade deficit with China simply be - cause we’re trying to be nice to them, but because we’ve made the choice to pay less for goods while sacrificing manufacturing jobs. Tariffs can be enacted effectively if the gains and losses are calculated in a high - ly specific manner. This requires months of discussion and carefully though out planning. However, it is difficult to find one economist who believes that Trump’s tariffs are being done with any kind of specific plan in mind. It is also practi - cally impossible to find one economist who believes that the tariffs will have a positive long-term economic impact. Trade wars and tariffs are complex issues that many Americans may not be fully aware of until their pocketbooks are affected. It is a subject that must be weighed in a nuanced manner. Is the possibility of bringing back some manufacturing jobs worth an increase in the price of consumer goods? Are the possible benefits to some industries worth the negative effects to many other industries? What should give people pause is that it’s not an issue where there are many arguments on both sides. Almost every opinion of both historians and economists is that these widespread tariffs will prove to be overwhelmingly negative long-term. Obviously, Ameri - cans should hope that these tariffs buck tradition and do provide overwhelming - ly positive effects, but be prepared for possible negative consequences. n