Title: The Effects of Tariffs and Trade Barriers in CBO’s Projections | Congressional Budget Office
Headings: The Effects of Tariffs and Trade Barriers in CBO’s Projections
The Effects of Tariffs and Trade Barriers in CBO’s Projections
What Tariffs Have Been Imposed?
How Do the Tariffs Affect the Economy?
How Uncertain Are CBO’s Estimates of Those Effects?

Content: A few countries are exempted from certain tariffs. For example, Canadian and Mexican imports were granted exemptions from the tariffs on steel and aluminum products. Other tariffs affect only imports from China, covering about half of U.S. imports from China and targeting mostly intermediate goods (items used for the production of other goods and services) and capital goods (such as computers and other equipment). In response to those tariffs, U.S. trading partners have retaliated with their own tariffs on U.S. products. As of July 25, 2019, retaliatory tariffs had been imposed on 7 percent of all goods exported by the United States—primarily industrial supplies and materials as well as agricultural products. How Do the Tariffs Affect the Economy? In CBO’s projections, the tariffs affect U.S. economic activity in several ways. First, they make consumer goods and capital goods more expensive, thereby reducing the purchasing power of U.S. consumers and businesses. Second, they increase businesses’ uncertainty about future barriers to trade. Such uncertainty leads some U.S. businesses to delay or forgo new investments or make costly adjustments to their supply chains because changes in trade policies might affect the costs of their operations.