Cailianshe – March 6 (Editor: Liu Rui)
Goldman Sachs’ latest report, in collaboration with the International Monetary Fund, highlights that the tariffs recently imposed and those still under consideration by US President Donald Trump are disrupting US trade relations. The increase in tariffs will affect all major industries in the United States — while some industries may benefit, many more are likely to suffer.
US Manufacturing Will Be Hurt
Trump’s tariffs took effect on Tuesday, Eastern Time, on products from Canada, Mexico, and China — the United States’ top three trading partners.
In the coming weeks, Trump plans to increase tariffs on imported steel and aluminum from 10% to 25%, starting March 12. Additionally, a reciprocal tariff policy is expected to take effect on April 2. Further, the US administration is considering imposing a 25% tariff on EU-made cars and a 10% tariff on other key imported products.
Trump has also warned that if America’s trading partners retaliate, even more tariffs could follow.
Goldman Sachs economists, led by Jan Hatzius, wrote in their analysis:
“These tariffs could help some domestic industries but hurt others… Higher tariffs would raise the prices of imported goods and increase demand for some domestically produced goods. But higher tariffs would also raise production costs for some US producers and could trigger foreign retaliation against some US exports, both of which could hurt US manufacturing.”
Secondary Material Production Industries Will Be Hit the Hardest
The Goldman Sachs analysis focused on Trump’s tariffs on Chinese products, as well as the upcoming tariffs on steel, aluminum, key imports, and European cars. While US steel, aluminum, and oil and gas producers may benefit from these tariffs, downstream manufacturing industries — which process these raw materials into finished products — are expected to suffer the most.
“The biggest beneficiaries will be primary steel and aluminum manufacturing and raw material processing industries, while the biggest harm will be felt by industries specializing in secondary material production, such as steel and aluminum product manufacturing, petroleum and coal products, and pharmaceutical products,” Goldman Sachs economists noted.
They also highlighted that a 10% tariff on pharmaceuticals and related chemical products could impose a sizable 1% drag on US pharmaceutical manufacturing production. This is because while imported end-use drugs don’t hold a significant market share in the US, the American pharmaceutical industry heavily depends on global production of intermediate drugs.
Goldman Sachs pointed out that tariffs on key imported products like steel, aluminum, oil and gas, semiconductors, and pharmaceuticals will have a significant impact on American companies.
Will American Goods Face a Boycott?
Beyond the direct impact of the tariffs, Goldman Sachs economists also raised concerns about potential consumer boycotts against American products.
“In addition to the possibility of retaliatory tariffs imposed by foreign governments, US producers appear to face some consumer boycotts,” they noted, citing examples of boycotts of American goods during the Iraq War.
While it remains difficult to predict how widespread these boycotts may become, some have already begun. Canada’s boycott of US alcohol and Europe’s boycott of US cars are notable examples.
That said, Goldman Sachs estimates that the actual impact of these boycotts on US exports has been minimal so far — around -0.1% since early February.
The Overall Economic Impact
Goldman Sachs’ analysis suggests that the net impact of Trump’s tariff plan through the production channel remains small. The estimated drag on US industrial output is -0.2%, while the drag on GDP is -0.04% — a relatively minor impact on most industries.
However, the report cautions that while the production impact may be limited, the broader economic effects could be more significant. Lower real household incomes and tighter financial conditions could exacerbate the damage caused by these tariffs.
As the situation continues to unfold, the long-term impact on American industries and consumers remains to be seen.
