Isolationist trade policies could cut $2 trillion from GDP: study

The difference between open and closed trade policies could cost the U.S. economy $2 trillion by 2022, according to a study by a consortium of analysts.

The study by Zurich Insurance, Ernst & Young, the Atlantic Council and the Organization for International Investment modeled three policy scenarios for the United States. 

The first, an isolationist model that ramped up tariffs and immigration restrictions, could lop $1.5 trillion dollars off America’s economy over the course of five years, the analysis found, and spur the loss of 1.3 million jobs.

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The second scenario, an “Atlanticist” model that would see the U.S. focus trade on Europe and the Americas to the detriment of other trade partners, would result in the loss of $502 billion in GDP and 428,000 jobs. 

The final, internationalist model, which would see increased trade as import taxes and restrictions on movement scaled back, would add $505 billion to the economy relative to current projections and produce an additional 428,000 jobs.

In all, the difference between the isolationist and the internationalist models amounted to $2 trillion in economic activity and 1.7 million jobs.

The report comes as the Trump administration tackles trade policy on three fronts: ongoing negotiations over updating the North American Free Trade Agreement, discussions with China over its trade practices and a looming decision on whether to exempt some of America’s closest trade partners from steel and aluminum tariffs.

Critics worry that if President Trump follows through on his threats to impose tariffs, it would kneecap America’s economic growth. Trump has argued that it should be easy to win concessions in trade disputes and that his actions will lead to more positive trading terms for the United States.

A survey of financial executives included in the Zurich study found that a majority — 61 percent — were bullish on investing in the American economy, while 68 percent said that the the new Republican tax law would help their bottom line. 

The GOP is campaigning on positive effects from its tax policies ahead of November’s midterm elections, arguing that the law will boost jobs, wages and investments. 

Almost two-thirds of the companies with U.S. employees said they expected to hire more workers in the coming months. 

But fewer than half of the companies said they expected to channel their tax savings into new U.S. investments.

Further, 68 percent believed that U.S. protectionism was on the rise, and 46 percent of those said it would hurt their investments. 

The survey was conducted by Ernst & Young and included responses from 497 chief financial officers in 30 countries between February and March of this year.