A professor from New York University (NYU) has called on the Trump administration to outline a clearer "time horizon" for its tariff policies in order to give greater economic certainty, while expressing his optimism that the current intense trade dispute between the U.S. and China will eventually be brought back down to a more mutually acceptable level.
Nicholas Economides, professor of economics at NYU's Stern School of Business, gave his assessment on the impact of U.S. President Donald Trump's tariff measures in an interview with the China Global Television Network (CGTN) on Wednesday.
Commenting on the latest economic data which showed the U.S. experienced a 0.3 percent drop in GDP while seeing a 41.3 percent growth in imports in the first quarter, Economides said the sharp rise in imports likely came as many companies were effectively stockpiling before Trump's long-expected tariffs took effect.
He noted that the difference between the import figures and the slump in GDP can be simply attributed to "accounting."
"I think the mass increase in imports was because of the anticipation of tariffs. And how does it make a difference on the GDP? It's just the way accounting works. So, this number is bigger. So, other numbers are smaller. So, that's how GDP appears smaller. There is no magic to it, it's just accounting," he said.
Trump, who on Tuesday marked the 100th day of his second term in office, sought to pin the blame for the economic contraction in the first quarter squarely on his predecessor Joe Biden, stating in a social media post that it was the Biden administration that left "bad numbers," while calling on Americans to "be patient" over his tariff policy.
The economic fallout from Trump's tariffs has wreaked havoc on global markets and created a cloud of uncertainty, and Economides said it's important that the Trump administration sets out its long-term objectives and gives a clearer time-frame of how long it intends to pursue this trade strategy, in order to give more businesses more stability.
"From my point of view, as an economist, I would say it's very, very important for the Trump administration to explain what exactly it's trying to do with tariffs and whether the tariffs are going to be a short-run negotiating tool, or they're going to be there for some time, a year or longer, to make sure that companies come back to the United States or to collect money. So, these are completely different goals, and the Trump administration and the secretary of the Treasury, they have to explain how exactly they expect things to work, and especially in what time horizon they expect things to work," he said.
Trade tensions between the U.S. and China have intensified since last month, with the White House hiking the total effective tariff rate on Chinese imports to 145 percent, while the Chinese side has vowed it would "fight till the end."
Given the potential risks and disruption of a prolonged trade dispute, Economides believes the two countries will eventually have to find a solution that will see these steep tariff rates pegged back to a more "reasonable" level for the good of both countries and the wider world.
"We are kind of in the early stages, I believe. But this present trade war is painful to both countries, both the United States and China. And there are very big incentives for both countries to find a way to create some compromise. I'm always a bit more optimistic than average, but I think that given how much pain there is on both countries, it will be the leadership of both countries [who] will find a way to start ratcheting down the numbers of the tariffs and eventually find a reasonable number in which both sides can live with and stay with that," he said.
NYU professor believes steep US-China tariffs will ratchet down to "reasonable" level
