The tariffs are a double-edged sword. U.S. manufacturing is weaker than expected

U.S. manufacturing contracted for a fifth straight month in December, with the institute for supply management’s monthly reading hitting a more than 10-year low. The purchasing managers’ index fell to 47.2, the lowest level since June 2009, as global trade tensions continued to weigh on us manufacturing.

Meanwhile, two new reports show that U.S. tariffs on imports have had a bigger impact on manufacturing and industrial output than initially thought.

Despite the first wave of tariffs on solar panels and dishwashers in January 2017, industrial production and manufacturing grew at a healthy pace for most of 2017 and 2018. But since the end of 2018, U.S. manufacturing has stalled, and tariffs and retaliatory tariffs on its trading partners have stunted economic growth.

According to Flaaen and Pierce, the extra tax does not boost manufacturing employment or output.

In a separate paper published by the national bureau of economic research (NBER), economists Mary Amiti, Stephen Redding and David Weinstein write that the us economy is experiencing a recession. Tariffs are borne almost entirely by us companies and consumers, although policymakers insist they are not.

In addition, they say the first tariffs imposed in early 2018 are only now having a full impact on U.S. imports.

Interestingly, according to the census bureau, the U.S. trade deficit with the rest of the world recently narrowed to the lowest point in trump’s three-year presidency. In the first 11 months of 2019, the deficit fell 0.7 percent, or $3.9 billion, from a year earlier. Analyst Frank said this raises some questions about the economists’ views.

Robin Bell

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