Tariffs, Uncertainty, Investment, and U.S. Trade Deficit

Tariffs increase uncertainty domestically and internationally. decrease corporate investment, and will not decrease the U. S. trade deficit.

From Marc to Market "Tariffs will not Reduce the U.S. Trade Deficit"

"The US trade deficit is likely to widen due to growth differentials and the impact of taxes on imports." 

 From the New York Fed --- "Do Import Tariffs Help Reduce Trade Deficits?"
"... what seems clear from our analysis is that import tariffs will reduce both imports and exports."



From the Atlanta Fed --- "Are Tariff Worries Cutting into Business Investment?"
"An uncertain outlook for trade policy can cause firms in all industries to delay investments while they wait to see how trade policy disputes unfold."
"The negative effects of tariff worries on U.S. business investment could easily grow."

From Econbrowser, Steven J. Davis, a University of Chicago Booth School of Business Professor of International Business and Economics writes --- "Trump's Trade Policy Uncertainty Deters Investment"
"In closing, I should note that the harmful consequences of tariff hikes and trade policy uncertainty extend well beyond short-term investment effects."

In the CBO's "An Update to the Economic Outlook: 2018 to 2028"
"Higher tariffs on more imported products, however, could add to inflationary pressure,which in turn would not only reduce the purchasing power of domestic income but also increase the costs of  domestic production, making the prices of U.S. exports less competitive in international markets. In addition, retaliatory tariffs on U.S. exports are likely to reduce the profitability of U.S. businesses whose products are targeted by those tariffs.

"Furthermore, heightened uncertainty about trade policy could discourage businesses from making capital investments that they might otherwise have made, because changes to trade policy affect price competitiveness in foreign markets as well as the costs associated with global supply chains. Recent volatility in equity markets might indicate that such uncertainty is already taking a toll on the value of U.S. businesses."


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