CGTN Europe spoke to Associate Professor of Political Economy at Birkbeck University Dr. Ashok Kumar to discuss the potential impacts of U.S. tariffs on the economy, consumer prices, GDP, unemployment, and inflation.
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00:00Let's now talk to Dr. Ashok Kumar, the Associate Professor of Political Economy at Birkbeck University of London.
00:06Professor, good to see you. We're just hours off Mr. Trump's announcement now at the White House.
00:11How do you think these tariffs will affect the US economy, particularly in terms of inflation and ordinary prices for shoppers?
00:22Well, if they are imposed, sort of universal tariffs, as some have suggested,
00:29again, it's really hard to say because, you know, Trump has announced sort of tariffs with Canada and Mexico
00:37and pulled back and used it as a bargaining chip. So if he does impose that, there's no question,
00:43and I don't think it's just a mainstream economics view, I think even heterodox economists,
00:47everyone who's looking at this can see very clearly that the prices for consumers is going to skyrocket.
00:54That may have an impact on GDP, on unemployment, on inflation, of course.
01:00So there's a lot of knock-on effects, not only for trade globally, but just in terms of the US economy.
01:06And so it's just simply the case that if you do targeted tariffs, like steel, etc., that have domestic production,
01:13you can actually see boosts in American consumption of American-made products.
01:18But if you see consumer durables, which aren't made in the US, or at least a large proportion of the supply chain isn't made in the US,
01:25there's no way you can turn that around, especially when there's such an instability in the market.
01:30Investors are simply not going to start building factories.
01:33So what's going to happen is you're going to see a rise in the prices of consumer durables.
01:37And you know, Mr. Trump's supporters might well say, if they were here,
01:41look, suck up the short-term pain, America is going to see the benefits long-term.
01:46Make American manufacturers great again, they might say. Do they have a point?
01:51Well, there's not much evidence to support that.
01:54I mean, if you're saying make America great again, you want to go back to the 1950s,
01:57before you had sort of the 1970s and globalization.
02:01The problem with that is when they tried bits of this in, say, Trump's first term,
02:06they introduced tariffs on Chinese products.
02:11China responded, and you saw a collapse of, say, US soy, because 75% reduction in soy.
02:18And it had to be bailed out by Trump.
02:21In 2018, he introduced tariffs on washing machines.
02:26That increased the price of not only imported washing machines,
02:31but also domestically produced washing machines by $86, because you saw a kind of price gouging,
02:37just like the agflation report you just gave.
02:40A lot of it has to do with monopoly producers' price gouging.
02:43They can get away with increasing prices, so they do,
02:45because they have no domestic competitors and international competitors, the price is going up.
02:50So they don't match it, but they increase the price.
02:53So the knock-on effect of something like this, when you don't have internal investment,
02:58will be not just a short term, but actually quite a long term,
03:03because there's no indication that in three years' time, when Trump is replaced,
03:07that these tariffs will stay in place,
03:09which means that investors aren't going to build the infrastructure that you need to produce in America.
03:16Professor, good to see you. Thanks for that.
03:18Dr. Ashok Kumar, Associate Professor of Political Economy at Birkbeck University of London.