Decoupling from China, increased domestic production would boost economy
Washington. The Coalition for a Prosperous America (CPA) today released a groundbreaking study on the impact of a potential 25 percent across-the-board tariff on all imports from China. CPA research found that such a move would deliver significant, sustained benefits for the US economy, including the addition of $125 billion to GDP in 2024 and the creation of 721,000 additional jobs.
“China’s rise has come at the expense of US jobs and manufacturing,” said CPA Chairman Dan DiMicco. “This new research demonstrates just how much the United States stands to gain from reclaiming our manufacturing base. Blind adherence to free trade clearly hasn’t worked, and boosting domestic production should now be our top priority.”
CPA Chief Economist Jeff Ferry and Senior Economist Steven Byers built a detailed model of US trade with China to examine the effects of the imposition of a permanent, across-the-board 25 percent tariff on US imports from China. The model showed that a 25 percent tariff boosted annual growth in US gross domestic product (GDP) each year in the five-year projection, contributing 0.2 percent of additional GDP growth in 2023 and 2024. Overall, this “permanent across-the-board 25 percent tariff” (PATB-25) would add $125 billion to total GDP by 2024, equivalent to a $700 bonus for every American.
With the permanent tariff, some production would be reshored to the US from China while some would move to lower-cost third countries. Overall, this would stimulate both US consumption and production, adding 365,000 manufacturing jobs. By 2024, $69 billion worth of annual production would have migrated from China to the United States.
“Our model demonstrates that across-the-board US tariffs on Chinese imports stimulate the US economy, increase US production and jobs, and lead to a reduction in US import costs over time,” Ferry said. “The model provides additional evidence that decoupling the US economy from China and its predatory trade and subsidy practices will make the US economy stronger, with more production, investment, and jobs.”
Ferry noted, “What’s particularly encouraging is that we found inflation rises only marginally, and never by more than two-tenths of a percentage point. Chinese imports would become more expensive due to the tariff, but production would also move to other countries with lower average costs.”
Added Michael Stumo, CEO of the CPA, “CPA member businesses grew because of the reshoring impact of tariffs last year. Our member manufacturers tell me that they expect more orders this year as buyers move procurement back from China. The combination of added growth from reshoring and stable import costs due to industries moving to lower cost countries shows that we can grow the economy at the same time we reduce our exposure to authoritarian China.”