One mystery of the Trump -era economy has been why U.S. manufacturing slumped sharply in late 2018 and 2019 after surging the year before. The Occams razor culprit is the onset of trade war, and now comes new economic evidence to back that up.
In a striking new paper, Federal Reserve economists Aaron Flaaen and Justin Pierce examine the impact of the tariff outbursts of 2018 on U.S. manufacturing employment, output and prices. This is important work because 2018 marked the start in earnest of President Trumps campaign to change the world trading order, using tariffs as his preferred bludgeon.
In 2017 President Trump held off on tariffs as he focused on deregulation and moving the tax reform that finally passed Congress in December. U.S. manufacturing surged that year and continued to grow through mid-2018 in both output and employment.
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