National Security or Insecurity? Trump Tariffs Will Cost 195K to 624K Jobs

PIIE estimates Trump tariffs will cost 195,000 to 624,000 jobs depending on how countries retaliate.

The Department of Commerce initiated a national security investigation on auto and parts products on May 23. Findings and recommendations are due by mid-February 2019 but could be issued much sooner.

PIIE, the Peterson Institute International Economics says Trump's Proposed Auto Tariffs Would Throw US Automakers and Workers Under the Bus.

President Trump is reportedly considering raising US duties to 25 percent on all imports of automobiles—including SUVs, vans, and trucks—and auto parts, invoking the same national security law recently used to impose tariffs on steel and aluminum. A new PIIE analysis shows that if he did this, production in these industries would fall 1.5 percent and cause 195,000 US workers to lose their jobs over a 1- to 3-year period or possibly longer. The US auto and parts industries would shed 1.9 percent of their labor force. The analysis assumes there would be no exemptions for any country (or even for North American Free Trade Agreement [NAFTA] partners, as in the steel and aluminum cases). The potential trade action would affect more than $200 billion in US imports.

If other countries retaliate in-kind with tariffs on the same products, production would fall 4 percent, 624,000 US jobs would be lost, and 5 percent of the workforce in the auto and parts industries would be displaced (table 1). This second scenario would also hurt US exports of these products more than imports. The aggregate effects on the US economy in either scenario would be small.

Jobs Lost

Both scenarios demonstrate how reliant the domestic industries are on imported parts, or intermediate inputs, that are not produced in the United States or that have no easy US-made substitute. Tariffs would raise the cost of these parts and domestic production, which makes products more expensive to consumers and lowers demand for them in the United States and abroad. Consumers could expect to see prices rise for both imported and domestically produced vehicles.

US Auto Exports

US auto exports total $51.1 billion.

Truck exports are another $15.1 billion, nearly all of it to Canada.

Tweet to Think About

How Stupid is This?

Damn stupid.

The knock-on impacts, which the PIIE did not estimate, are likely to be as important, if not more important

Instead, let's portray it as "Winning".

Why Do This?

As a matter of national security, we allegedly need to harm the US auto sector.

Related Articles

  1. Trump Considers 25% Tariffs on All Auto Imports as Matter of "National Security"
  2. Trump Started a Global Trade War Today: Canada, Mexico Responded, So Will Europe

Mike "Mish" Shedlock

Comments (28)
No. 1-25
Tengen
Tengen

From what I've read on various forums, many supporters of these tariffs don't even care if they aid the US economy. They're so irate over the last 30 years they want a change, any change, in course just to see if it can be done. Consequences be damned. As long as the right talking heads condemn it, many of them would welcome the damage with open arms.

You know who's not worried about this? Our friends at the BLS. Even if these projections are roughly correct and 500K jobs are lost, they'll just remove another 800K people from the labor force, maybe even push unemployment under 3%. It's all so easy!

AWC
AWC

Maybe this socialist nonsense will finally bring this piece of work down? Sometimes it takes a 2x4 up side the head to get a mules attention.

2banana
2banana

And NAFTA, we were told by the experts, would create massive middle class jobs in America and in Mexico. Because it would lead to the exponential growth of the Mexican middle class who would then buy American products.

Ummmm....never happened.

Kinuachdrach
Kinuachdrach

Models are fun! Select the right Garbage In, and you can get any Garbage Out you want -- see, e.g., Anthropogenic Global Warming.

So 624,000 jobs are going to be lost -- assuming that no business reacts rationally to changed circumstances, and goes back to making some of those formerly made in the USA items, now made in Korea items, in the USA again.

But setting that common sense aside, how does 624,000 jobs lost compare with the Millions of jobs lost over the last 20-30 years while feckless politicians and short-sighted model-intoxicated academics failed to notice that other countries were waging trade war against the US? Common sense tells us that the US cannot run giant trade deficits for ever -- something has to change. If anyone has a better idea than the President, bring it forward. (And unilateral surrender is not a better idea!)