By John Q. Hosedrinker 
The World Bank forecasts a sluggish 2.7% global economic growth in 2019, mirroring the performance of 2019 and representing a significant weakening. This rate, while manageable, is insufficient to elevate living standards globally. The projection reflects concerns over factors such as potential US tariffs, which could severely impact international trade and overall economic health. This subdued growth highlights the fragility of the current economic climate.
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Tariffs are predicted to cause the worst global growth in six years. The economic consequences of these policies are far-reaching and complex, impacting consumers, businesses, and international relations. The uncertainty surrounding the implementation and scope of these tariffs adds to the overall concern.
Economists express significant worry about the unpredictable nature of these tariff policies. The lack of clarity regarding whether tariffs will target inputs or outputs, and the potential for a sweeping 60% tariff on all Chinese goods, creates immense instability for businesses trying to plan for the future. This uncertainty could lead to businesses delaying investments and halting expansion plans, further dampening economic growth.
The potential for a trade war is a major concern. If other countries retaliate with their own tariffs, the resulting trade war could severely disrupt global supply chains, leading to shortages and price increases for consumers. History shows that such actions can isolate a country economically and force it to bear the brunt of the economic consequences. Countries may simply choose to bypass the affected nation and forge their own trade deals, leaving the imposing country in a vulnerable position.
The impact on consumers is undeniable. Higher prices for goods due to tariffs will directly reduce consumers’ purchasing power, leading to a decrease in overall demand. This decreased consumer spending can trigger a chain reaction, impacting various sectors of the economy and potentially resulting in job losses and business closures. The idea that businesses will simply relocate production to the imposing nation and negate these effects seems overly optimistic, as the cost of production in different locations can vary dramatically.
The potential for the growth of black markets is another serious consideration. When goods are made more expensive through tariffs, it creates incentives for the development of illegal channels for procuring cheaper goods. This can weaken the formal economy, result in lost tax revenue, and potentially lead to other forms of criminal activity. History is replete with examples of how attempts to control trade through heavy tariffs invariably lead to the expansion of black markets.
The argument that tariffs act as a consumption tax, generating more freedom by shifting taxation from income to imported items, ignores the broader economic consequences. While a consumption tax might initially appear more straightforward, its impact on economic growth, job creation, and international relations makes it a significantly more complex issue. The potential for short-term consumer suffering and long-term economic instability far outweighs the perceived benefits.
Political motivations also heavily influence the implementation of tariffs. It’s suggested that corporate price gauging is often scapegoated under the guise of inflation, allowing businesses to use economic conditions as leverage for tax cuts. This manipulation of the economic narrative to serve corporate interests undermines the democratic process. The average voter, often lacking a deep understanding of economic principles, can easily become caught up in simplistic narratives and vote against their own economic interests.
The economic consequences of tariffs extend beyond mere price increases. Increased tensions between countries and a corresponding rise in military spending are entirely possible. This redirection of resources away from productive investments can further hinder economic growth and create a more volatile global environment.
Ultimately, the forecast of the worst global growth in six years due to tariffs stems from a complex interplay of factors, including the uncertainty surrounding the policies themselves, the potential for trade wars, the direct impact on consumers, the rise of black markets, and the underlying political motivations. The effects are projected to be far-reaching and potentially devastating for the global economy. The failure to fully consider the long-term economic consequences of tariffs demonstrates a troubling lack of economic understanding at the highest levels of government.