President Donald Trump’s newly implemented tariffs and additional tariffs under consideration are disrupting trade relationships and industries are scrambling to react to the higher costs brought on by the import taxes, with some set to fare better than others in the tariff wars, a new report finds.
Trump’s tariffs took effect on Tuesday for products from Canada, Mexico and China — America’s three largest trading partners, respectively — with Chinese goods facing an additional 10% tariff above the original 10% tariff the president imposed. Canadian and Mexican products face 25% tariffs, though energy products from Canada have a lower 10% tariff.
President Trump has additional tariff plans that haven’t yet taken effect. He plans to raise tariffs on imported steel and aluminum from 10% to 25% effective on March 12, and he expects to implement a reciprocal tariff policy starting on April 2. Additionally, 25% tariffs on cars made in the European Union and 10% tariffs on critical imports are anticipated — with more tariffs possible if U.S. trading partners retaliate.
“These tariff packages will likely help some domestic industries but hurt others,” Goldman Sachs economists led by Jan Hatzius wrote in their analysis. “Higher tariffs will raise prices of imported goods, boosting demand for some domestically-produced goods. But tariff increases will also raise production costs for some domestic producers and will likely prompt foreign retaliation against some U.S. exports, both of which could hurt domestic production.”
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The economists’ analysis examined the 20% tariffs on China as well as the pending tariff packages on steel and aluminum, critical imports and European cars. It found that while producers of steel and aluminum, as well as oil and gas, would benefit the most, industries involved with manufacturing those materials into finished products would be hurt the most.
“The largest beneficiaries are primary steel and aluminum manufacturing and raw material processing, while the industries hurt most would be those specializing in the production of secondary materials, such as manufacturing of steel and aluminum products, petroleum and coal products, and pharmaceutical products,” the economists wrote.
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They added that the 10% tariff on pharmaceutical and related chemical products “would generate a sizable 1.0% drag on pharmaceutical manufacturing production” because imports of final pharmaceutical products don’t have a sizable market share in the U.S. — though the industry “relies heavily on global supplies of intermediate pharmaceutical goods for production.”
Goldman Sachs noted that tariff hikes on critical imports like steel and aluminum, oil and gas, semiconductors and pharmaceuticals would have a bigger impact on U.S. firms than higher tariffs on imports from China.
“The reason is that U.S. producers both use more critical imports than imports from China as intermediate inputs to domestic production, and also compete with some of these tariffed critical imports than with imports from China on the output side,” they wrote. That overlap and policy uncertainty “could be a more meaningful deterrent to investment than policy uncertainty about tariffs on imports from China.”
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“In addition to potential retaliatory tariffs imposed by foreign governments, U.S. producers also appear to be facing some consumer boycotts,” the economists noted, citing examples of limited boycotts during the Iraq War.
“While it hard to know how far recent boycotts against U.S. products such as alcohol in Canada and autos in Europe could ultimately go, past experience points to a limited impact, and we estimate that the reported declines since early February have amounted to just a -0.1% hit to U.S. exports,” they wrote.
Taken together, Goldman Sachs estimated that the net effect of those tariff packages “strictly through these production channels is a modest -0.2% drag on U.S. industrial output or -0.04% on GDP, with modest effects on most industries.”
“While the net effect through the production-side channels is small, we expect to have more substantial effects through other channels, in particular by lowering household real income and tightening financial conditions,” they wrote.
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