Are President Trump’s Tariffs Hurting the US Economy?

  • Several economists have blamed President Trump’s tariffs for slowing down the US economy. So far, US economic growth has been reasonably strong despite all of the noise about trade war uncertainty.
  • The economic data in September have been decent. On Monday, the data showed that the US manufacturing PMI in September rose to a five-month high. Previously, the housing data and retail sales data were better than expected.

Trump’s tariffs

On Monday, IHS/Markit released the September flash PMI data. The flash reading showed the US September manufacturing PMI at 51.0 compared to 50.3 in August. The September reading was better than expected. The data showed the US manufacturing PMI increasing to a five-month high. Notably, several observers have blamed President Trump’s tariffs and the trade war for slowing down the US economy. So far, the US economy has looked reasonably strong considering the slowdown conditions in Europe and China.

Europe’s slowdown

Europe’s slowdown has been aggravated by falling global car sales and Brexit uncertainty. Germany, Europe’s economic powerhouse, has been especially weak. Vehicle sales have stalled globally. However, US automotive sales have been reasonably strong. Ford (F) and General Motors (GM) are in the green this year. However, Tesla (TSLA) has double-digit losses.

Trump’s tariffs and trade war

President Trump’s tariffs and trade uncertainty are taking a toll on the sentiments, especially in the manufacturing sector. Chris Williamson, the chief business economist at IHS/Markit, said, “Jobs are now also being cut across the surveyed companies for the first time since January 2010, as firms have become more risk averse and increasingly eager to cut costs.” The survey showed that the US non-farm payroll could fall below 100,000 per month.

Trump’s tariffs hurt the job market

Incidentally, the August PMI surveys showed that companies are slowing their hiring decisions amid uncertainty about President Trump’s tariffs. The US August non-farm payroll data were also lower than analysts’ expectations. Notably, a strong employment market came to President Trump’s rescue in the trade war. The US consumer sector has been strong despite President Trump’s tariffs and trade war uncertainty. Data released earlier this month showed that US retail sales were also better than expected.

Could the US job market get worse?

The IHS/Markit survey shows that the US job market could get worse. The monthly new job additions could fall below the 100,000 level. In the first eight months of 2019, non-farm payrolls have averaged 158,000 per month compared to 223,000 per month in the same period last year. A slowdown in the job market could weaken President Trump’s grasp during trade talks.

Not all gloom and doom

Meanwhile, the situation isn’t all gloom and doom. Last month, there was a sharp escalation in the US-China trade war after President Trump announced new tariffs. Despite the trade war escalation, the US economic data in August looked decent. The housing data also looked strong. Meanwhile, housing starts and building permits were better than expected in August.

The US-China trade talks have also resumed. President Trump delayed the October 1 tariffs by 15 days at China’s request. China has also taken measures to de-escalate the trade tensions with the US. However, the trade talks have been volatile.