A new study shows tariffs impacting U.S. equipment manufactures will cost the U.S. GDP $29 billion a year for ten years, or $290 billion total, if continued.
The Association of Equipment Manufacturers (AEM) funded and coordinated the release this week of a new report showing the impact of tariffs on the equipment manufacturing industry and the broader U.S. economy. The new report “The Economic and Industry Impact of Protectionism Tariffs on the Off-highway Equipment Sector,” was authored by the global research firm IHS Markit and estimates the impact of the Trump administration’s Section 232 and Section 301 tariffs.
Several of the report’s key findings speak to the significant, long-term impact on the U.S. economy, including:
- Placing tariffs on about $265 billion of imports will hurt the U.S. economy, largely from the direct effect of higher prices, yielding average lost GDP of $29 billion a year for 10 years.
- The effect on employment is negative; the tariffs will suppress domestic job gains by 260,000 over 10 years.
- Consumers will pay higher prices and reduce their real spending by $23 billion per year throughout the forecast horizon (ending in 2027).
The report also highlights specific impacts on the equipment manufacturing industry:
- Tariffs will increase costs of producing U.S. agriculture and construction equipment by 6 percent; with its higher steel-related product content, the costs of producing U.S. mining equipment will increase 7 percent;
- Total loss in employment related to diminished output of all off-highway equipment is projected to end the forecast period with a loss of 20,700 jobs.
AEM will continue work on delivering the message that, while the Trump Administration needs to continue to address competitive trade issues with countries like China, including dealing with weak intellectual property protections, restrictions on foreign investment, and policies that limit competition, tariffs are clearly harming U.S. workers, farmers, and their families.
There are currently tariffs on $250 billion dollars’ worth of imports from China as a result of the Trump Administration’s use of Section 301 of the Trade Act of 1974. This amount equals half of the total amount of goods imported into the U.S. from China in 2017. Separately, Section 232 tariffs or quotas on steel and aluminum imports have raised the cost of manufacturing equipment in the United States. AEM will continue to advocate for equipment manufacturers’ access to free and fair trade to better support our industry’s competitive disadvantage in the global marketplace.