President Trump’s increasingly hawkish use of tariffs against China and Mexico could have drastic consequences for global trade and American jobs, according to a pair of new reports.
More than 400,000 U.S. jobs would disappear if Trump follows through on plans to activate escalating tariffs on $350 billion in Mexican imports next week, according to an analysis by the Perryman Group, a Texas-based economic consulting firm. That combined with existing levies against China has put global trade on course for its worst year since the 2009 financial crisis, according to Dutch bank ING. Its analysts forecast that international trade will grow 0.2 percent in 2019, a steep falloff from the 3.3 percent recorded in 2018 and 4.8 percent in 2017.
Much of that slowdown would stem from Trump’s ongoing trade war with Beijing. Last month, after negotiations broke down, Trump slapped a 25 percent levy on $250 billion in Chinese goods and began the process of taxing all products from China, which quickly retaliated with tariffs of its own.
Weeks later and angry over migration, Trump threatened tariffs on $350 billion in Mexican goods. That levy is set to kick in Monday at 5 percent and rise incrementally to as much as 25 percent, unless, Trump says, Mexico cracks down on Central American migrants crossing into the United States along their shared border.
Trump routinely misstates how tariffs work, insisting they are absorbed by U.S. trading partners. Tariffs in fact are taxes paid by U.S. companies that bring in products, so those costs are borne by manufacturers, chemical producers and others. U.S. companies typically pass along some of those costs to consumers.
The Mexican tariffs alone could erase more than $41 billion in gross domestic product for the United States, along with $24.6 billion in income each year, according to the Perryman Group. Overall job losses could hit 406,000.
“To impose a tariff on all goods from our largest trading partner will cause significant cost increases and other harms to the economy,” said M. Ray Perryman, the firm’s president and chief executive.
Texas would bear the brunt of those job losses, given its extensive trade network with Mexico. The state’s economy could lose almost $12 billion in GDP, more than $7 billion in annual income and more than 117,330 jobs, the firm said.
Mexico has long been one of the United States’ top trading partners, and it recently passed China to become the largest — in part because of the U.S.-China trade war. But Trump has seized on immigration as an intractable issue between the two countries. Data released this week by U.S. Customs and Border Protection showed a surge in the number of immigrants entering the United States across the Mexican border. Last month, the agency apprehended 144,278 people — mostly families and children — trying to enter the United States. That is nearly triple the 51,862 reported in May of last year.
“Much is at stake for both nations,” Perryman said. “If Mexico retaliates and imposes tariffs on the U.S., or the tariffs go higher than 5 percent, the negative effects on the economy would be even greater.”