World's top economists warn US to pull back from triggering global trade war - Telegraph

World's top economists warn US to pull back from triggering global trade war

 Donald Trump
Donald Trump has slapped tariffs on steel and aluminium imports, but top economists warn he is doing more harm than good to the US CREDIT: ALEX WONG/GETTY
 Tim Wallace
17 MARCH 2018 • 7:21PM
Dozens of the world’s top economists have called on the US to pull back from a trade war, warning that it will have ruinous consequences for the country and the wider world economy.

President Donald Trump’s aluminium and steel tariffs will hurt far more Americans than they will help, Chicago Booth University’s IGM Forum of 43 economists, warned.

Every one of the esteemed panel disagreed with the statement that the tariffs would “improve Americans’ welfare”.

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Chicago’s Austan Goolsbee said the tariffs are the economic equivalent of “punching [your]self in [the] face”.

Nobel prizewinner Richard Thaler said: “In net we want more trade, not less. This is unlikely to help and runs the risk of starting a trade war.”

“Sad,” he added, in imitation of President Trump’s tweeting style.


@realDonaldTrump
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

9:50 PM - Mar 2, 2018

Yale University professor Christopher Udry said: “It will improve some Americans welfare, and hurt many others. On balance it’s a very costly way to help those who gain.”

Harvard’s Eric Maskin compared it to the Smoot-Hawley tariffs of the Thirties which were blamed for worsening the Great Depression.

“I thought we had learned our lesson with Smoot-Hawley,” he wrote.

The decisive survey is a sharp rebuke to President Trump’s claim that “trade wars are good, and easy to win”.

He has argued that the US’s trade deficits mean it is “losing many billions of dollars on trade with virtually every country it does business with”.

 Richard Thaler
Nobel prizewinning economist Richard Thaler is one of those critical of the protectionist plans CREDIT: GEOFF PUGH
Mr Trump’s tariffs of 25pc on steel imports and 10pc on aluminium are being introduced on grounds of “national security” as the US’s own metals industry is struggling to compete with cheaper imports.

The row has been intensified by accusations of subsidised metal being unfairly “dumped” on US markets.

The EU has hit back, threatening to retaliate with tariffs on imports of US orange juice, bourbon, Harley-Davidson motorbikes and Levi’s jeans – all iconic American products, typically made in critical swing states in US elections. Such a response is aimed at hitting the US economy where it hurts, but also shows how quickly trade spats can balloon into full-scale trade wars across swathes of products.


Economists at ING calculated that a 1pc rise in the price of all imports into the US and into the EU would boost domestic production in the US by 0.07pc and the EU by 0.1pc, but hit the wider economy to the tune of 0.36pc and 0.28pc of GDP respectively. As a result, any benefit of the tax is more than outweighed by the damage inflicted.

Former Goldman Sachs executive and ardent free-trader Gary Cohn was the president’s top economic adviser until the first week of this month, when he resigned after losing the argument on tariffs.

That raised fears Mr Trump was moving in a more protectionist direction. But his new choice to head the White House’s National Economic Council, Larry Kudlow, is also a critic of the tariffs.