Trump is a peculiar idea of ​​salvation brought by customs – experts warn of serious consequences

US president Donald Trump For some reason, he believes that with high imported duties he will save the country’s economy and jobs. Although the US economy has gone very well until now, and there is in practice in the country full employment.

Of course, industrial workplaces have decreased in recent decades, as in all other rich countries. Still, for some reason, Trump wants to create and protect industrial jobs.

The passage of thought goes so that when high customs is placed on imported goods, more production is forced to build more in the United States.

Idea It’s kind of logical and functional. If the price of steel and aluminum imported from Canada or Europe rises by 25-50 percent, even a slightly more expensive domestic product is a single competitive product.

The steel factory may well hire more people when it does not have to compete with imports.

So why do stock prices collapse in the United States and experts fear that the economy will be in a recession?

Because all other consequences of customs are harmful and direct to the economy. Let the expert explain.

Research institute Labore Mika Maliranta sending a video for the former Republican President of the US Ronald Reagan from 1987 from radio speech.

Reagan justifies why duties are bad. He says that as a result of customs, domestic companies begin to rely on state protection in the form of customs customs. They no longer have to compete or develop technological innovations.

The competitiveness of companies and the whole economy as a whole is impaired, eventually duties lead to new ones and trade war. Everybody disappears.

High The immediate and most obvious consequence of customs is the rise in prices. According to Maliranta, they increase prices directly and indirectly.

Customs will increase the price of imported goods, allowing companies using these products to pay more for the goods.

As foreign competition is eliminated, producers within the country can also raise their prices and as Reagan stated, it can be a little more relaxed in its production efficiency and technology development.

Elevated prices are also transferred to end products prices, cars, home appliances and finally to services and everything else.

“Customs are actually a consumption tax,” Maliranta says.

Duties They also prevent effective international division of labor.

The high standard of living of Americans and Europeans is partly based on the fact that someone makes us goods and clothing with lower wages somewhere else.

Supplier David E. Sanger mentions In the New York Timesthat there was a lot of shoe industry near Boston in the 19th century. Now the area is known for its high -tech companies and law firms.

The international division of labor makes sense.

Maliring On the other hand, wondering what production in the United States even wants to increase when almost everyone is already at work. The unemployment rate is about four percent.

“Employment is at an exceptionally high level.”

If you want to hire more people in the industry, even though everyone is already at work, wages will rise even further. The inflation thread is complete.

On the other hand, individual companies can benefit from limited duties if they are protected from foreign competition. But in the end, large -scale duties do not even benefit from domestic companies.

The decline in imports would strengthen the dollar in relation to other currencies, which would weaken the competitiveness of American companies in international trade.

Come Usually followed up and their newcomers, the trade war that everyone suffers. Last week, Trump threatened to take revenge on EU whiskey counterparts with 200 percent wine sheds.

So in the future, America may be drinking a very expensive champagne.

The newcomers strike many American companies depending on exports. Electric car manufacturer Tesla already warned the Trump administration that the duties could be a significant harm to the exports of Teslo.

Se, What companies and investors fear the most in addition to the newcomers is the most complex consequence of customs: disruption of production chains.

“International value chains are very highly tuned and complicated,” Maliranta says.

For example, Canada and the United States have so far been almost as one economic area. The car’s ingredients and components can travel across the border of the countries up to dozens of times at different stages of manufacture before they are installed on the car’s frame at an American car factory.

The same applies to many other products.

When duties break these chains, industrial production can be seriously disturbed.

“Efficiency losses can be really significant. Then overall production may not increase, but on the contrary, it may shrink, ”says Maliranta.

Evidence has already accumulated.

Namely, Trump tried steel and aluminum back in his first season, in 2018.

Council of Foreign Relations Research Institute According to the article, duty increased the number of jobs in steel and aluminum sectors by about 5,000 at least temporarily. And product prices rose by a couple of percent.

The consequences were dramatic in industrial sectors that use steel and aluminum as a raw material. There were 75,000 jobs lost. So the damage was multiple.

What The importance of Trump’s election in industrial workplaces even do?

Less than 13 % of US jobs are only in the production sector, ie industry, construction or in mines.

Trump doesn’t seem to care. He has been nonsense that the duties can even lead to a recession. Still, he believes that in the long run they are good for America.

The view is special.

“The harmfulness of customs is a few things that economists have had a strong consensus for ages,” Maliranta says.