The US Needs a "Trade Deal": The Economic Impact of "No Trade Deal" Is Considerable and Expanding

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of companies, including Apple, GM, Ford, UPS, Walmart, and Procter & Gamble, among many others, have either reduced or withdrawn their profit estimates for 2025.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.

The US Needs a "Trade Deal": The Economic Impact of "No Trade Deal" Is Considerable and Expanding