E Why Trade Restrictions Will Harm The American Economy

The Trump Administration’s restrictive trade policy intentions are frightening to many countries, but they also are risky for the U.S. economy as well.

The trade policy changes under consideration include the introduction of border adjustment taxes, new border taxes, and renegotiations of existing trade agreements.

These restrictive measures are intended to boost both U.S. exports and employment, especially in the manufacturing industries. A Federal Reserve Bank Of San Francisco report briefly highlights some of these complexities.

This commentary will focus only on two issues, the difficulty of restoring “lost” jobs in the U.S. manufacturing industries, as well as the unintended harm to American industry from curbing imports which are involved, is supporting American production.

The first point to stress is that despite shrinking employment in manufacturing due to improved technology and import competition, manufacturing output in the U.S. has continued to expand.

Secondly, some imports play an important role in the U.S. manufacturing process. Indeed, the role of global supply chains makes it very difficult to classify goods or services as purely export- or import-related.

A case in point is the aviation industry, which relies heavily on foreign-made materials and intermediate parts from imports.

Other examples are the apparel and computer equipment sectors which rely heavily on imported goods. Of course, these industries also generate many American jobs in transportation, retail, advertising, and financial and insurance services.