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Trump administration tariffs hurt U.S. manufacturing, Fed finds

American tariffs on foreign goods that President Donald Trump has said are aimed at bolstering manufacturers have instead resulted in job losses, higher consumer prices and decreased productivity, according to a recent study by the Federal Reserve.

The Trump administration, which has used tariffs on a scale not seen since the 1930s, defends the trade measures as a way of protecting U.S. industries from unfair global competition. But tariffs are less effective in boosting manufacturers these days because domestic firms that make goods in the U.S. rely on imported parts, the researchers said.

As a result, the "small boost from the import protection effect of tariffs is more than offset by larger drags" from these higher prices for imported components, Fed economists Aaron Flaaen and Justin Pierce wrote.

Makers of autos, computers, and agricultural and construction equipment use parts manufactured in a range of countries. And it is American companies that pay tariffs on those imports, not countries like China, contrary to what Mr. Trump has claimed.

Higher import prices make the cost of producing goods more expensive. And higher costs for parts and lower revenue from exports often means companies invest less in their workforce, according to the Fed. The U.S. manufacturing sector currently faces its deepest slump since the Great Recession a decade ago. Meanwhile, tit-for-tat tariffs imposed by other countries can make American goods more expensive overseas, hurting U.S. manufactures. 

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

The U.S. and China this month announced some details of a "phase one " trade deal, which is expected to be signed sometime in 2020. But the bulk of tariffs imposed by the Trump administration are still in effect.

U.S. and China's "phase one" trade deal 07:07

Here are the 10 U.S. industries that have seen the biggest boost in prices because of 2018 tariffs, according to the Fed study:

1. Aluminum 
2. Electrical lighting equipment
3. Home and institutional furniture and kitchen cabinet
4. Semiconductor and electronic components
5. Iron, steel mills and ferroalloy
6. Aluminum sheet, plate and foil as well as rolling, drawing and extrusions 
7. Household appliance manufacturing 
8. Other electrical equipment and components
9. Leather 
10. Industrial machinery

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