My prediction is the Trump tariffs will have no meaningful impact on the economy, despite all the media hype. The tariffs are more of a symbolic gesture to drum-up support from the ‘base’, than a substantive act of economic reform. My heuristic is that the media narrative is almost always wrong. If the liberal media is hyping tariffs as some sort of cataclysmic event that will bring back 70’s era gas lines, then I can confidently dismiss it. Maybe it will cause inflation to tick up .1%, or some negligible amount. This is the same media that said that Trump winning would cause a bear market and recession, and the same for Brexit too.
This is no different than a a year ago when the useless media parroted the narrative about how Trump ending or renegotiating trade deals would hurt the economy. With the S&P 500 up 25% since early 2017, GDP growing steadily, and unemployment at 15-year lows, the media yet again was wrong. White it’s true that Trump has not gotten around to negotiating much, if Wall St. were concerned about the possibly of the economy being hurt by Trump reneging on such deals, it would be reflected in the market, which it isn’t.
One thing that’s annoying is how people, especially pundits and the media, confuse/conflate trade with NAFTA, or use the words interchangeably. They are not the same thing.
Trade has existed since the Neolithic period, because its economically beneficial for nations, tribes, and individuals to exchange with each other…there are mutual benefits for both sides. NAFTA merely eliminates some tariffs; NAFTA is NOT trade. This is why the U.S. economy does not hinge on these overblown trade deals, because trade has always exited in one form or another. Putting up some small barriers for certain types of goods is not tantamount to summarily ending trade, which is how the media portrays it as. It’s worth noting that the U.S. stock market and economy boomed in the 80’s, years before NAFTA was ratified by Bill Clinton in 1994.
The argument for free trade, which NAFTA is a subset of, is based on the theory of comparative advantage. In theory, the imposition of tariffs hurts this exchange, and consequently raises import costs, possibly lowering standards of living for both parties. Like most economics issues–such as minimum wage vs. unemployment, the efficacy of tax cuts, immigration vs. job loss, or the ability of monetary policy to spur economic growth–the free trade debate will never be resolved. There are compelling arguments by smart people, for both sides of the issue.