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Business economists have grown a little less optimistic about the outlook for the U.S. economy as a result of U.S. trade policies. The National Association of Business Economists reports that its survey of 45 professional economic forecasters now projects a median 2.8% growth in real GDP from Q4 2017 to Q4 2018, down from 2.9% three months ago.
More striking is the reversal in the upside and downside risks to the group's outlook. In the latest survey, 31% of forecasters see more risk to the upside versus 75% in the previous survey released in March, and 57% of forecasters currently see more risk to the downside.
The March survey was focused on tax cuts and near-term fiscal policy; the latest survey includes an assessment of U.S. trade tariffs, which were just a threat when the survey took place between May 9 and May 16, according to the NABE. Now those tariffs are official policy.
The U.S. government imposed tariffs of 25% on steel imports and 10% on aluminum imports from the European Union, Canada and Mexico, which triggered retaliation from those major trading partners.
Canadian Prime Minister Justin Trudeau said his government would levy a 25% tariff on steel imports from the U.S. and a 10% tariff on aluminum and other U.S. goods starting July 1 if the tariffs still stand after two weeks of talks with the U.S. Mexico's Economy Ministry said it, too, would target a number of U.S. goods starting June 20. And the EU also filed a case against U.S. trade tariffs at the World Trade Organization on Friday.
U.S. "growth prospects appear to be related to federal fiscal policies," said Steven Cochrane, NABE survey analyst and a managing director at Moody's Analytics, in a press release. While NABE expects fiscal policy changes, primarily tax costs, will increase growth — by 0.4 percentage points in 2018 and 0.3 percentage points in 2019 — more than three-quarters of those surveyed "believe that current trade policies will have a negative effect," said Cochrane.
