Trade War ‘Would Be Horrible’ for the U.S. Economy, Arthur Laffer Says

(Bloomberg) -- Arthur Laffer, a former economic adviser to President Ronald Reagan and to Donald Trump's campaign, said the threat of a global trade was hanging over the U.S. economy and could undo the pro-growth policies that Trump has championed.

“I don't think we're going to have a trade war, but if we did, it would be horrible,” Laffer told Bloomberg Television in an interview Tuesday. “We've got all sorts of things going for us and the only thing blocking is the threat of trade war.”

Laffer, perhaps best known for his “Laffer Curve” principle of supply-side economics that argues tax cuts help pay for themselves by spurring growth, said “no economist in his right mind would ever want a trade war.” Laffer praised Trump for an “amazing” performance as president and added, “I don't think he wants a trade war at all,” citing a potential drag on financial markets.

The U.S. has imposed 25 percent tariffs on imported steel and aluminum and threatened to slap more levies on other products from some of its biggest trading partners, including China, Canada, Mexico and the European Union. Tariffs on $34 billion in Chinese goods are set to go into effect Friday. The other nations have vowed to retaliate in what would amount to a trade war that could raise prices and slow the global expansion.

“The evidence is so clear that trade wars destroy economies globally,” Laffer said.

To contact the reporter on this story: Reade Pickert in Washington at epickert@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Alister Bull, Scott Lanman

©2018 Bloomberg L.P.