Tomas J. Philipson, Donald Trump’s chief economist, states that the trade wars led by the American president last year had a negative impact on companies’ investments, so much that it contributed to slowing down the country’s economic growth.
The White House has finally admitted that Donald Trump’s trade wars were detrimental to the economy. The decreased economic growth in America last year was at least partly due to the trade wars led by Trump – they affected companies’ investments, said Tomas Philipson, the White House chief economist, on Thursday.
“Once we got renegotiation of trade agreements, we saw uncertainty in the market, and investment took a hit,” reported Philipson at a press conference on the Council of Economic Advisers’ annual economic report.
1% Reduction of Gross Domestic Product?
To encourage American manufacturing, Trump last year started a protectionist policy that notably led to a trade war against Beijing, as the two countries imposed new customs taxes on each other. The American president also imposed taxes on European steel and aluminum, which prompted Europe to take a series of retaliatory measures against U.S. imports.
The American leader said repeatedly that his tariff strategies replenished the government’s fiscal coffers and did not harm the economy in any way. However, U.S. economic growth did slow down along the way, from 2.9% in 2018 to 2.3% in 2019.
Philipson refrained from clarifying to what extent the commercial uncertainty due to these strategies participated in slower economic growth. But the Swedish-born economist referred the reporters to a study done by the Federal Reserve that suggests the trade war climate could have reduced American and global GDP growth by 1%.