(Reuters) – The Trump administration’s tariffs could boost manufacturing and real income in most U.S. states, but lower jobs and incomes have adjusted inflation across the country, the Federal Reserve said on Monday.
Assuming the U.S. tariffs on Canadian and Mexico imports increased by 25%, 30% of Chinese goods and 10% of other parts of the world, the U.S. Federal Reserve Bank economists estimate that U.S. employment has fallen by 0.2% over the next four years, a decrease in U.S. services and agricultural jobs, and is expected to increase in manufacturing jobs.
While revenue adjusted for inflation could increase by 31 of 50 states, the rest (including major states such as California and Texas) will see a decline, resulting in a 0.4% drop in total U.S. real income.
“The states that lost the most from tariffs have close transaction links with the largest tariff impact countries,” the researchers wrote. The researchers noted that in some states, real income may have fallen by more than 2%, while others have risen at 1.7%.
The study, published in the latest economic letter from the Federal Reserve in San Francisco, is part of an ongoing effort by the U.S. central bank to try to figure out what President Donald Trump’s real impact on inflation and the labor market as policymakers believe when it may be necessary to resume downgrades to lower interest rates to support softening the economy.
This does not mean an exact prediction, the researchers noted. This is partly because tariff levels may be higher than the late-stage levels used in the analysis.
The Trump administration said the tariffs that will be reached by August 1 will be heavier than used as the basis for the Fed’s analysis in San Francisco.
(Reported by Ann Saphir; Editor of Paul Simao)
