On June 1st, the United States “imposed a 25% tariff on imports of steel, and a 10% tariff on aluminum, on the European Union, Canada, and Mexico.” While backlash immediately followed the act, since the inaugural tariff action, the US has seen strong economic growth culminating in a 4.1% second quarter GDP growth according to the Bureau of Economic Analysis.
With such negative receptions to the tariff announcement and the mixed analysis on its benefits, the question must be asked, if, as of today August 12th, American tariffs were a good idea. And the truth is simple.
As of today, yes, the tariffs have been a good idea.
I know that’s not a popular stance to take but whether you look at America’s strong economy or the stock market’s rebound since the tariff action, in the very short term, America has benefited overall.
When looking at the S&P 500 at the start of the year (Jan 1st), the index sat at 2,695.81. The day of the tariff, (June 1st), the index showed 2,734.62 or a 1.4% growth over 5 months. From June 1st to Aug 10th, the index has doubled its growth rate to increase 3.6% while closing Aug 10th at 2,833.28. Back by small business optimism and a high GDP growth rate, and the Trump tariff plan is a positive for the country.
To add, since tariffs have been enacted, the European Union has connected on a deal with the United States that could see the country get a more profitable deal as well. No matter how you look at it, this has helped America increase growth in a global platform.
Long term prospects are a different story….
Small business wages have not kept up with the growth seeing mainly large American corporations seeing the benefit. In addition, “in July 2018 the Trump administration announced it would use a Great Depression-era program, the Commodity Credit Corporation, to pay farmers up to $12 billion. This government assistance program aims to make up a shortfall as farmers lose sales abroad due to the trade war with China, the European Union and other states.” While China is currently taking the worst of the tariff situation, both parties are feeling some pain.
In addition, despite the good news from the European Union, the fact remains that the Trump Administration has yet to close any global trade deal in its era. NAFTA is still in the works as are countless other deals including the North Korea nuclear disarmament deal. While the prospects sound good, the truth is, until the Trump Administration signs off on a deal that is better than his predecessors, he has not accomplished any lasting victory.
Short term, Trump’s MAGA call is showing signs of life, but it could easily go the way of the repeal and replace Obamacare or Mexico Wall and end with nothing. Time will tell if President Trump can finally finish off on a promise he sold the American people on, but so far, it appears we are heading in the right direction.