Erroneous 2018 Predictions Repeated
By Steven Byers, CPA Senior Economist
Nearly a year after predicting 470,000 jobs would be lost due to President Trump’s tariffs on imported steel and aluminum, Trade Partnership Worldwide has published an updated study titled “Estimated Impacts of Tariffs on the US Economy and Workers.” The new report examines potential future impacts from different tariff scenarios.
The previous study in 2018 completely missed the mark, predicting reduced growth and job losses that never actually occurred. Trade Partnership Worldwide is now using the same methodology to report that current US tariffs, along with proposed new tariffs and retaliatory efforts by trading partners, will reduce US GDP by 1.04 percent and result in 2,235,400 jobs lost nationwide over 1-3 years.
The actual, observed impact to date of tariffs on solar panels, washing machines, steel, and aluminum shows no reduction in consumer demand, job creation, or growth. In fact, federal data reports that GDP grew at a rate of 3.5 percent in the 3rd quarter of 2018. Inflation has remained low, showing consumers are not facing price increases. Overall, robust job growth has continued unabated, and January 2019 BLS figures show 304,000 new jobs coming into the workforce that month—far more than the consensus estimate of 185,000.
The Trade Partnership relies on a computable general equilibrium (CGE) model that doesn’t include economic data from 2018. But that data is important because it documents structural changes in the economy, including new investment in aluminum, steel, and other industries that came about partially due to the tariffs.
The economic model used by the Partnership’s model overestimates consumer price increases resulting from tariffs as well as job losses in unrelated industries. Furthermore their results substantially underestimate the pro-growth effect of tariffs on domestic production, investment, and employment.
Given the inaccuracy of the predictions made in their earlier study, and a failure to update their model with 2018 economic data, the Trade Partnership’s warnings of large-scale job losses and decreased GDP should be taken with a high degree of skepticism.