Donald Trump's Trade War Tariffs Reduced Employment at U.S. Factories and Hiked Prices, Federal Reserve Study Finds

Import tariffs introduced by President Donald Trump aimed at protecting American manufacturers have actually caused job losses and higher prices for consumers, according to a study published by the U.S. Federal Reserve.

In March 2018, the Trump administration introduced steel and aluminum tariffs to counter what the president described as "aggressive foreign trade practices."

The president also took aim at Chinese goods as he started a trade war with Beijing that may be soon eased with a preliminary trade deal.

However, Federal Reserve economists Aaron Flaaen and Justin Pierce concluded that any gains made by the tariffs in reducing competition for some U.S. domestic industries were cancelled out by rising input costs and retaliatory tariffs.

Xi Jinping and Donald Trump
China's President Xi Jinping (R) shakes hands with US President Donald Trump before a bilateral meeting on the sidelines of the G20 Summit in Osaka.The trade war Trump has waged with China has cut jobs and increased U.S. prices, according to a new study. BRENDAN SMIALOWSKI/Getty Images

"We find that the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices," the study said.

The study also stated how the "globally interconnected supply chains" meant that there are limits to how much trade policy like tariffs can even protect domestic industries, especially as it usually means a "tit-for-tat retaliation."

"We find the impact from the traditional import protection channel is completely offset in the short-run by reduced competitiveness from retaliation and higher costs in downstream industries."

Industries hit by foreign retaliatory tariffs included those who produced magnetic and optical media, leather goods, aluminum sheet, iron and steel, cars and household appliances.

Meanwhile, American consumers had to pay more for a number of products which included boilers, architectural metals, transportation equipment and general purpose machinery.

"While the longer-term effects of the tariffs may differ from those that we estimate here, the results indicate that the tariffs, thus far, have not led to increased activity in the U.S. manufacturing sector," the study concluded.

Market Watch noted that the study did not take into account business confidence from the uncertainty caused by the tariffs which it said is the main reason why there has been a decrease in business investment in the U.S.

Lydia DePillis from ProPublica tweeted to her 21,000 followers that the study proves that that the "trade war is hurting the sector it was ostensibly supposed to help."

Meanwhile, figures released in September showed that since the start of the trade war with China in February 2018, American consumers and businesses had paid an extra $38 billion, according to the lobby group Tariffs Hurt the Heartland.

Newsweek has contacted the White House for comment.

In related news, officials in Beijing and Washington have hailed a preliminary trade deal which would give China relief from some tariffs in return for it increasing its purchases of American farm exports.