Tariff impact on U.S. are economy historically negative, experts say
NEW ORLEANS (WVUE) - Since the end of WWII, the United States has worked to minimize the number of tariffs across the global market, but recent moves by President Donald Trump and China have economists and market experts discussing a potential trade war.
Monday, the Dow Jones dropped more than 450 points after traders got troubling news out of China, which imposed tariffs on 128 products imported from the U.S., including pork, meat, fruit and steel pipes.
Market experts anticipated this move by China, calling it retaliation from Trump's tariffs on Chinese steel and aluminum imported to the U.S.
"Both sides there will pressure for more response. That is how trade wars happen," said Tulane economics professor Doug Nelson. "You do something that sounds like it's going to be small, and then someone responds, and you respond and then it spirals out of control."
Across the board, economists agree that imposing tariffs as a policy is never the best option, according to Nelson. He said the president is stepping into dangerous territory because Trump has already threatened additional tariffs on China. The more that happens, the more it will impact Americans directly.
"We benefit enormously from being able to trade internationally. Prices are lower for consumers because we are able to buy things that we consume at a lower price and prices are higher for things that we sell than we would have to sell if we could only sell them to the U.S.," Nelson said.
"There are some wrongdoings going on by some of our trade competitors, and the president is trying to address that. But I also think there are some instances where there really isn't a problem, and we are looking for one, and instead creating one, and I'd rather not see that," Jim Spiro said.
Spiro is a financial adviser and owner of the Spiro Group with more than three decades of experience. He said historically tariffs have negatively affected America's economy.
"We've had proof of this over the past. For a lot of reasons, one in general, it costs more jobs than it creates. It harms more industries than it helps. Over time, the countries in which the tariffs are being applied, as a general premise, settle out and they find a way around the tariffs," Spiro said.
However, Spiro said people who are invested in the market should not be overly concerned about the recent decline, especially considering the year of upside that just took place.
"Don't kid yourself. There's nobody who has any idea where things are going to go in the next week or month, but I'll give what I think is another much more important prediction and that is two, three, five, 10 years from now, I think the American economy will be bigger than it is today. I think the stock market will be a good reflector of that," Spiro said.
President Trump has discussed imposing about $50 billion worth of additional tariffs on Chinese goods following an investigation by his administration into the theft of intellectual property from U.S. companies.
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