In a dramatic escalation of trade tensions, President Trump unveiled a reciprocal tariff plan intended to align the tax rates imposed by other nations on American imports. Mark Zandi, chief economist at Moody’s Analytics, shares his apprehensions regarding the potential economic fallout, predicting higher inflation and job losses. He warns that a 10% tariff on Chinese imports could decrease the purchasing power of American households by $200 to $250 annually, effectively taxing consumers directly. As nations retaliate with their own tariffs, American jobs are likely to be at risk, creating a damaging cycle with no net winners.
Amidst concerns about when these tariffs will take effect, Zandi notes that investors currently show limited concern, speculating that Trump might not fully implement his tariff plans due to previous inconsistencies. However, he warns that a firm commitment could lead to adverse stock market reactions, evidenced by past tariffs causing observed declines in business profitability and employment.
Zandi rejects the administration’s assertion that tariffs will rectify trade discrepancies, asserting that historical evidence demonstrates the inverse—greater tariffs yield diminished trade and worse economic performance. He believes such policies impede competition, wage growth, and overall living standards.
Comparing Trump’s approach with previous administrations, he highlights two stark differences: the potential for widespread tariffs and the uncertainty surrounding their implementation. Unlike more targeted tariffs in the past, Trump’s broader strategy creates confusion, hindering businesses’ long-term planning. Decisions that impact investments for decades hinge on the unpredictable nature of these tariffs, as they are enacted via executive order rather than congressional legislation.
President Trump’s new tariff plan, designed to match foreign tax rates on American imports, raises significant concerns among economists like Mark Zandi who predict it could lead to higher inflation and reduced job figures. Zandi points out past evidence that shows tariffs usually hurt economic performance and competition. He emphasises the unpredictability of such broad tariffs under executive order that complicates long-term business planning.
Economist Mark Zandi fears President Trump’s proposed reciprocal tariffs could lead to increased inflation and job losses across the United States. The plan, aimed at matching foreign tax rates on American products, raises concerns over economic stability and long-term investments. Ultimately, Zandi argues that this broad tariff strategy creates uncertainty rather than resolving trade imbalances, leaving both domestic and global economies at risk.
Original Source: www.pbs.org
