NEW YORK – A year into Trump’s trade war, which has resulted in the most comprehensive protectionist trade policies implemented by the U.S. since the 1930s, signs are emerging that tariffs are taking a toll on the U.S. economy and its workforce. According to new research by Amit Khandelwal, Director of the Jerome A. Chazen Institute for Global Business at Columbia Business School, the U.S. economy lost $7.8 billion in the last year alone as a result of the trade war.
In the paper, “The Return to Protectionism,” Khandelwal and co-authors Pablo Fajgelbaum, Pinelopi Goldberg, and Patrick Kennedy document the short-term impacts of the trade war, including the steep price paid by U.S. consumers and producers, particularly those in heavily Republican counties.
The researchers reveal large and immediate impacts of the trade war on imports and exports. Imports have fallen 31.5 percent in response to the tariffs imposed by the Trump Administration, and exports have fallen 11.0 percent as a result of retaliatory tariffs imposed by trade partners.
Despite $23 billion in gains due to higher prices received by U.S. producers as part of the protectionist policies, the net effect is a loss of $7.8 billion annually. Consumers and firms across the country who have purchased foreign products are suffering from higher tariffs, too.
Interestingly, the researchers find that workers in heavily Republican counties have ended up bearing the brunt of the costs of the trade war. As a result of foreign retaliatory tariffs, which tend to target agricultural industries, the real wages of workers in those heavily Republican counties have fallen the most. In addition to retaliatory tariffs, U.S. tariffs also raised the costs of inputs used by workers in these counties.
For more information, please read the related Chazen Institute research brief (PDF).
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About the Jerome A. Chazen Institute for Global Business
The Jerome A. Chazen Institute for Global Business is the interdisciplinary hub of global business knowledge at Columbia Business School. By injecting a global viewpoint into coursework, supporting research on global business, and sponsoring provocative forums where business leaders and policy-makers engage in vigorous debate, we pool the vast wealth of knowledge that exists within Columbia Business School, distill it for people who operate in the world’s marketplace, and provide a global network for lifelong learning.
About Amit Khandelwal
Amit Khandelwal is the Jerome A. Chazen Professor of Global Business at Columbia Business School. He currently serves as Director of the Jerome A. Chazen Institute for Global Business.
His research interests examine issues in international and development economics, including the strategic response of firms to trade liberalizations and increased international competition.
Khandelwal received his PhD from Yale University in 2007 and holds a MA in economics from Yale University and a BA in mathematics and economics from Northwestern University.