Even though the U.S. economy has fared well over the past few years, there have been shortfalls in both the manufacturing and farming industries — two groups President Trump vowed to protect during his campaign and two groups that turned out to support him on election day. But with Trump’s America First economic and trade policies (which could be described as anti-globalist and protectionist), radical changes could be on the way with regard to trade, which could have a drastic impact on global markets and, subsequently, millions of Americans in those industries and on the outside, looking for a way back in.
With these talking points in mind, here’s a look at how Trump’s new trade agenda could have a direct impact on both you and your wallet.
Unemployment Could Skyrocket
Trump’s talk of imposing tariffs on other countries, including 20% on goods from Mexico and 45% on those from China (on everything from avocados to electronics) could prompt these other countries to respond with tariffs of their own. That has all the makings of a full-on global trade war that could potentially cause a global recession within a two-year time frame. A study by The Peterson Institute estimated up to 4 million jobs could be lost in a trade war, which would cause unemployment to rise by as much as 8.6% — higher than it was after Bush left office in 2008 during the last global recession.
There’s also the chance that we’ll get what’s called an aborted trade war. This means that Trump enacts the tariffs, then pulls them after realizing their significant economic impact. This results in fewer job losses — only around 1 million or so — with unemployment shooting up by about a point. Of course, a loss of that magnitude will still shake up the lives of families and communities, and it could have a ripple effect on the U.S. economy, causing wage stagnation, and eventually, the loss of more jobs.
Global Markets Could Tailspin
The issue goes beyond actions, for rhetoric has the potential to cause market instability. Some of Trump’s incidental remarks about companies have had significant effects on their stocks. Tough talk on tariffs and renegotiating trade agreements foster further uncertainty in U.S. markets, driving away potential foreign investors. And with China, where a lot of Trump’s attention has been focused, the potential exists to ice a very lucrative (though surely imperfect) relationship, slowing domestic exports, which would have a profoundly negative impact on the bottom line of those previously mentioned food producers. And that’s to say nothing about the value of having an economic tie to China. Something Trump may be grasping, in that he’s now pulling back on his vow to officially label China as a currency manipulator.
While none of this has come to pass so far, as Trump’s actions on trade have translated to little more than slight policy adjustments, there’s still a general sense of international uncertainty that could be corrosive.
The Poorest Households Could The Biggest Effects
Tariffs have historically had the biggest impact on the poorest households, a fact that’s been backed up by a study by the Peterson Institute for International Economics (PIEE), a nonprofit, nonpartisan (but pro-trade) think tank. For one, a bigger percentage of the money earned in a low-income house ends up going to the kind of goods that are affected by tariffs, such as food, clothing, and tobacco (the latter bearing a tariff of a whopping 90%).
Second, generally speaking, the cheaper the goods, the higher the tariff. Combining these factors means that Americans in the lowest income bracket will be hit two-fold. And when these goods become too costly, sales go down, which would impact the retailer’s bottom line, meaning fewer retail jobs.
As stated by the PIEE, “Millions of American jobs that appear unconnected to international trade — disproportionately lower-skilled and lower-wage jobs — would be at risk.” While the wealthy would see a noticeable impact, the hit on the poor and middle class would be significant, specifically on these households’ bottom lines.
Construction Costs Could Rise
The construction and real estate industries, who might have viewed candidate Trump as one of their own, could be in for a mixed bag. On one hand, Trump often cites the housing industry as being over-regulated, and if he decides to undo those regulations, that could create new growth opportunities. Additionally, increased spending on infrastructure — another one of his most popular talking points — could similarly provide a boost to the industry.
But slapping tariffs on specific products used in construction will predictably raise the cost of building homes, with significant amounts of the raw materials coming from both Mexico and Canada. The 24% tariff the Trump administration just placed on Canadian lumber is an example. Not only could it kickstart a potential trade war with our northern neighbors but by raising prices, it also continues to put home ownership out of reach for some. And that slice of the American dream is already at its lowest point in more than half a century.
Food (And Many Other Things) Could Cost More Money
If the current system of taxes and tariffs is upended, it could have a significant impact on farmers and ranchers — a business where the margins of success are already razor-thin. This effects exported goods, too. As the Dallas Morning News explained, cattle ranchers have spent years building their herds in anticipation that the tariff to Japan will drop from 38% down to just over 9%. If that opportunity vanishes, other cattle-producing nations will try to move in to the Japanese market where the U.S. no longer can, resulting in unsold livestock, eviscerated profit margins, and ranchers unable to make a living at their trade.
As a result, the cost of importing goods would go up significantly, and if that’s the case, those goods are clearly going to cost you more. Maybe a lot more. In an article for Wharton, Mauro Guillen, a Wharton International management professor, explained it best when he said “every time you’re introducing protectionism, you’re hurting the consumer.”
Though Trump has already pulled the U.S. out of the Trans-Pacific Partnership (TPP), a 12-nation trade agreement forged by former President Barack Obama, he has yet to enact any of the tariffs he’s spoken about so often — possibly due to the widespread criticism his agenda has encountered. How Trump responds to that going forward is the big question, and predictability is not one of his key traits. So for now, all we can do is hope that Trump doesn’t feel the need to see these plans fail before realizing that, in many ways, they’d be bad for U.S. consumers and workers.