The chief economist of the International Monetary Fund (IMF) recently delivered a stern warning about the consequences that tariff increases could have on global economic growth. “It’s a policy that is harming basically everyone,” Pierre-Olivier Gourinchas told the Financial Times. Given the burgeoning support for tariffs from both Democrats and Republicans, Gourinchas’ prediction could spell trouble for Americans no matter who wins the election in November.
In its October World Economic Outlook report, the IMF predicts that U.S. gross domestic product (GDP) could fall by “0.4 percent in 2025 and by 0.6 percent in 2026,” if a “sizeable swath” of global trade is hit with tariffs by mid-2025. Under this scenario, global GDP would decline by 0.8 percent by 2025 and 1.3 percent by 2026.
In its prediction, the IMF implemented a 10 percent tariff on all trade flows between the U.S., E.U., and China to model the retaliatory nature of tariffs. The Fund’s scenario also included an extension of the 2017 Tax Cuts and Jobs Act, decreased net migration to the U.S. and Europe, and higher global borrowing costs.
Early in his campaign, former President Donald Trump floated a specific 60 percent tariff on Chinese goods alongside a 10 percent across-the-board tariff, which he recently increased to 20 percent. “It’s just what he thinks galvanized an audience,” Scott Lincicome, vice president of general economics and Stiefel Trade Policy Center at the Cato Institute, tells Reason. “Let’s face it, none of this has any rigorous econometric modeling behind it, so it could be as simple as he thinks 20 percent sounds better.”
“Taking the candidates at their word, you would have to say that Trump’s tariffs would be orders of magnitude worse than what Kamala Harris might do, or say she will do,” Lincicome adds.
Harris’ stance on the issue has been less clear, as she has flip-flopped several times since before becoming the Democratic candidate. As vice president Harris presided over the Biden administration’s decision to continue Trump-era tariffs, before implementing additional ones earlier this year. Before the presidential debate with Trump, the Harris campaign told The New York Times that she would “employ targeted and strategic tariffs to support American workers, strengthen our economy, and hold our adversaries accountable.”
When asked why Harris has not distinguished herself by opposing these measures, Lincicome notes that supporting tariffs is just part of the “conventional wisdom in Washington today” even if polls may not completely support this assertion. “The view among the political experts is that elections are won or lost in a few places with a few votes,” and those critical “voters like tariffs.”
Given the IMF’s projections, bipartisan support for tariffs could lead to increased costs and slower economic growth for Americans regardless of who wins in November.
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