“What I think is one of the big problems with the whole discussion of trade is it almost always focuses on just producers,” Peterson said. “When in fact, the impact of tariffs or trade barriers affect both producers and consumers.”
Putting a specific number of how the tariffs have affected consumers financially is a bit trickier though, he admitted.
“Our tariffs in China are going to hurt consumers in the U.S., they’ll hurt producers in China, so China retaliates, that hurts consumers in China, and helps producers in China, and it gets to be a huge mess!” Peterson said. “You’ve got all these contradictory forces. What is the net effect going to be of all of that? Well, it depends then on precisely what industries get hit, the size of the tariffs, and how long they’re there. It gets terrifically complicated.”
One study found that “Trump tariffs cost American consumers and producers $68.8 billion per year in higher costs and lost output, with the tariffs paid entirely by Americans.” A different study concluded that the tariffs have generated nearly $3 billion per month in new taxes.
“At some point in the future, people will be in a situation and they’re not going to say, ‘Woe is me, it’s because of the trade war,’” Peterson said. “Their incomes may have gone up, they may not have gone up as much as they would have gone up if you hadn’t had the trade war, but you can’t know that. It’s a very difficult think to make a case that the trade war’s going to be very costly, although I think it will be.
He continued: “What about the British in 2025, after Brexit? Will they be able to say, ‘If we hadn’t done that stupid Brexit thing, I would have $25 more a week in my paycheck than I do?’ They won’t be able to say that, because they can’t possibly know what would have happened exactly if they hadn’t done Brexit.”
Peterson referenced the Smoot-Hawley Tariff Act of 1930, which increased import duties by 50%. It was intended to protect American farmers, who were dealing with increased competition, overproduction, and declining prices.
“We raised [tariffs] after the stock market crash, and world trade contracted by about two-thirds,” he said. “It turned out, in the U.S., our imports went down by 60%, but our exports also went down by 60%. We just lost on both counts.”
‘There could be permanent damage from the trade war’
With the Chinese showing good faith by buying U.S. soybeans, Peterson does think there is a chance for there to be a full recovery for both consumers and producers in this trade war. At the same, though, the damage may have already been done.
“Those kinds of things take longer to sort themselves out,” Peterson said. “There could be permanent damage from the trade war, just because it interrupts all of these relationships that people build up over time in conducting their business.”
Soybeans are a stark example. Chinese importers, who began purchasing soybeans from Brazil at the height of the trade war, could permanently choose to take their business elsewhere.
“Trade wars generally are going to leave everybody worse off,” Peterson said. “They’re not the kinds of things that can be ‘won.’ To talk about winning and losing trade wars is, I think, to miss the boat. What we want is to try to have open markets, free trade, as much as possible.”
Adriana is an associate editor for Yahoo Finance. Follow her on Twitter >@adrianambells.
Source : https://news.yahoo.com/trade-war-hurt-world-us-china-154052679.html