Increasing tariffs on China will likely hurt US growth - Nomura economist

Raising tariffs on all Chinese goods that enter American borders will likely hurt U.S. economic growth, which has already shown signs of slowing in recent months, according to Japanese financial firm Nomura.

President Trump has claimed on several occasions that the U.S. has collected billions of dollars in tariffs paid by the Chinese, which partly contributed to the strong American economy. Economics experts say that’s not, in fact, how tariffs work, and Nomura’s chief U.S. economist, Lewis Alexander, said the net impact of the trade fight is likely negative for America.

Alexander said there’s evidence that tariffs collected by the U.S. government are being paid by American firms and consumers, rather than the Chinese.

The continued tariff fight between the U.S. and China come at a time when the American economy is “clearly slowing,” Alexander said. He added that “the biggest thing” that will affect U.S. economic growth and decisions by the Fed is how trade developments affect business confidence and investments in the coming months. Still, the potential hits to the U.S. economy don’t justify a rate cut by the Fed, according to Alexander. He explained that if the U.S. moves ahead to impose 25% tariffs on all Chinese goods, core inflation in America could tick up by 0.5% over the next 12 months.