The US Needs a "Trade Deal": The Economic Impact of "No Trade Deal" Is Considerable and Expanding
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President Trump has stated that he "would not be disappointed" if a deal with China is not reached swiftly, as "not doing business is also a good deal for the United States." However, this perspective is flawed or his economic advisors are misinforming him. Trump's tariff approach failed to consider the US economy's heavy reliance on consumer imports and direct and indirect economic effects on importers, trucking and rail companies and retailers.
The adverse effect on sales (or company revenue), employee earnings, and company profits might amount to approximately seventy percent of the total import value.
Based on 2024 trade data, the US imported consumer-related goods valued at $1.5 trillion. The Federal Reserve's report on industrial production estimated domestic production of consumer goods at $2.18 trillion, for a combined total of roughly $3.7 trillion. However, as consumer goods progress through the economic chain from ports and shipping to retail, significant value is added to their production and importation value.
Based on GDP data, consumer spending on goods in 2024 surpassed $6.3 trillion, which is $2.6 trillion more than the total value of imports and domestically produced goods. This indicates that for every dollar spent on imports and domestic production, there is nearly an additional 70 cents in value-added, associated with markup costs (such as shipping, distribution, labor, etc.) and profits.
Distinguishing the profit margins between imported consumer goods and those produced domestically is not possible. However, even if these margins are the same, the potential impact on the economy's revenue stream (GDP) and income stream (GDI or wages and profits) remains significant. That's why a lengthy and expanding roster of companies, including Apple, GM, Ford, UPS, Walmart, and Procter & Gamble, among many others, have either reduced or withdrawn their profit estimates for 2025.
It's crucial to recognize that the US imports over $1.6 trillion in industrial supplies and capital goods. To fully understand the economic impact of global trade flows, it's necessary to consider the potential loss of both consumer and business imports, though the latter are harder to assess. Even if the impact on business goods is only half as significant as on consumer goods, the overall effect on the US economy from China alone is about 2% of GDP. If imports from other key trading partners, such as Canada and Europe, are also lost, the impact doubles.
In other words, contrary to what President Trump and his advisors has said, the "US Needs A Trade Deal," and soon.
Joseph G. Carson
AuthorMore in Author Profile »Joseph G. Carson, Former Director of Global Economic Research, Alliance Bernstein. Joseph G. Carson joined Alliance Bernstein in 2001. He oversaw the Economic Analysis team for Alliance Bernstein Fixed Income and has primary responsibility for the economic and interest-rate analysis of the US. Previously, Carson was chief economist of the Americas for UBS Warburg, where he was primarily responsible for forecasting the US economy and interest rates. From 1996 to 1999, he was chief US economist at Deutsche Bank. While there, Carson was named to the Institutional Investor All-Star Team for Fixed Income and ranked as one of Best Analysts and Economists by The Global Investor Fixed Income Survey. He began his professional career in 1977 as a staff economist for the chief economist’s office in the US Department of Commerce, where he was designated the department’s representative at the Council on Wage and Price Stability during President Carter’s voluntary wage and price guidelines program. In 1979, Carson joined General Motors as an analyst. He held a variety of roles at GM, including chief forecaster for North America and chief analyst in charge of production recommendations for the Truck Group. From 1981 to 1986, Carson served as vice president and senior economist for the Capital Markets Economics Group at Merrill Lynch. In 1986, he joined Chemical Bank; he later became its chief economist. From 1992 to 1996, Carson served as chief economist at Dean Witter, where he sat on the investment-policy and stock-selection committees. He received his BA and MA from Youngstown State University and did his PhD coursework at George Washington University. Honorary Doctorate Degree, Business Administration Youngstown State University 2016. Location: New York.
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