Moody's Analytics Inc. forecast the tariffs would erode the competitiveness of a wide range of U.S. manufacturing companies including in the transportation, construction and heavy machinery sectors. Moody's also forecast the cost of the tariffs would be passed on to consumers, raising inflationary pressure.
Higher inflation resulting from tariffs and follow-up actions could also push central bankers to raise interest rates at a faster pace.
Even without the impact of tariffs, reaching Trump's goal of a sustained 3 percent growth pace will be a challenge. Tax cuts will underpin demand as consumer spending and business investment remains strong. But the pace of household purchases -- which account for about 70 percent of the economy -- probably won't repeat its recent performance anytime soon amid still-modest wage gains and higher debt loads.
Ongoing depreciation of the dollar would make it difficult to rein in the trade deficit, which Trump has pledged to shrink.
Mnuchin faced tough questions from House Republicans during the hearing Tuesday. Representative Kevin Yoder of Kansas remarked that nearly half a million of his constituents' jobs are supported by trade, but that trade wars and tariffs will "negatively impact" the local economy.
"Chinese retaliatory action poses a direct threat to their livelihood," Yoder said.
(With assistance from Shobhana Chandra.)
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