Global | Tariffs: a misguided shock therapy

Summary

In the 21st century, history is again being challenged by a wave of protectionism from the United States. President Donald Trump has just announced a barrage of tariffs that marks the country's biggest protectionist offensive in almost a century.

Key points

• Key points:
• A base tariff of 10% for all imports, 20% for European goods, and additional tariffs that collectively add up to 54% for Chinese products.
• Excluding Canada and Mexico, the individual tariff is the result of dividing the U.S. goods trade deficit with each country by the volume of its imports. On average, tariffs are around 25%.
• Evidence indicates that these policies carry more costs than benefits. Widespread tariffs are the worst form of protectionism; they make products more expensive, generate disruptions, harm investment and productivity, and ultimately hinder growth.
• While waiting to see whether agreements are reached, whether retaliation occurs, or how the tariffs are implemented, early consensus estimates suggest that the tariffs could reduce U.S. GDP by more than 1.0 percentage point.
• In the case of the EU, this decrease could surpass 0.8 percentage points, and 0.4 in the case of Spain.

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