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Nobel Winner Robert Shiller: Trump's Trade Tariffs Will Hurt Most People

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By    |   Monday, 05 March 2018 01:17 PM

Nobel-winning economist Robert Shiller predicts that President Donald Trump's tariffs proposal will hurt most people.

"I'd wonder if this isn't just a first step, that Trump has in mind raising other tariffs,” he asked CNBC recently.

“Even if he doesn't, there will be other countries who will retaliate and they'll get bigger. This is really like a first shot in a war and that's what is worrisome," said Shiller, who won a Nobel Prize for Economics in 2013.

"That's what happened in the Great Depression," he told CNBC.

Trump unveiled his decision last week to impose tariffs on steel and aluminum imports, a decision said he would make official early this week.

Shiller predicted Trump's tariffs proposal will have an "immediate disruption effect" and will hurt most people, except perhaps steel workers and those who own stocks in steel companies.

Shiller, an economics professor at Yale University, said that tariffs have been trending down for decades thanks to the general growth and prosperity around the globe, CNBC.com explained.

"Low tariffs help the whole world organize itself better and helps relieve inequity," he said. "The unfortunate thing, though, is that it does harm some American workers. We have to consider that."

He also doesn't dismiss critics who say China has been manipulating the steel market, creating an unlevel playing field.

"It's good for the whole world if China prospers. We want to see everyone growing. That helps bring peace and tranquility and more good for us," he said.

Many financial analysts warn that Washington’s sudden push for steep tariffs on steel and aluminum imports could saddle the U.S. Federal Reserve central bank with the worst of both worlds - rising inflation and a slowing global economy.

The combination of fiscal stimulus, which Fed officials viewed as hardly a game-changer for monetary policy, and a brewing trade war is a recipe for the sort of no-win situation central bankers faced in the 1970s when they had to stomach high inflation or run the risk that interest rate increases would trigger a recession, Reuters explained.

The central bank will now have to factor in the macroeconomic impact of the tariffs, which is expected to be small in itself, but also the broader risk of global retaliation, government-imposed price pressures on a variety of goods, and an ebbing of world trade.

Canada, Brazil and the European Union have already threatened countermeasures, representing what economists refer to as a“deadweight loss” to global welfare. The International Monetary Fund on Friday said Trump’s move likely would damage the U.S. economy as well as the economies of other nations.

In his Capitol Hill testimony, Fed Chair Jerome Powell described trade as a“net positive” while conceding it created some losers in the economy, and said“the tariff approach is not the best approach. The best approach is to deal directly with the people who are affected rather than falling back on tariffs.”

The Fed is expected to increase rates at its March 20-21 policy meeting. Policymakers will also issue fresh forecasts that will indicate whether the core of the rate-setting Federal Open Market Committee has shifted its view, Reuters explained.

For his part, Trump on Monday appeared to suggest that Canada and Mexico could win exemptions to his planned sweeping tariffs on steel and aluminum if the two countries sign a new NAFTA trade deal and take other steps.

"We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed," Trump tweeted.

"Also, Canada must treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying," he added.

(Newsmax wire services contributed to this report).

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Nobel-winning economist Robert Shiller predicts that President Donald Trump's tariffs proposal will hurt most people.
robert shiller, trump, tariffs, hurt
Monday, 05 March 2018 01:17 PM
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