As of Monday, March 12, 2018
I’ve been watching with skepticism the political tornado that has swept around the globe with President Trump’s decision to impose 10 and 25 percent tariffs on aluminum and steel, respectively, as part of his “America First” philosophy.
Trump has long called for fairer trade deals and now argues that the tariffs are necessary to safeguard our struggling steel and aluminum industries against less expensive foreign imports.
The tempest from Trump’s announcement came from both sides of the political aisle, with more than 100 Republicans submitting a letter to Trump that implored him to hold off on the tariffs. They expressed concern about retaliation from other countries and higher prices that would offset the benefits of their tax overhaul.
The president’s top economic advisor, Gary Cohn, announced his impending resignation shortly after Trump announced the tariffs.
The European Union threatened to retaliate against Trump’s metals tariffs by targeting Harleys produced in House Speaker Paul Ryan’s Wisconsin and bourbon in Senate Majority Leader Mitch McConnell’s Kentucky.
But, what if, just what if, this rhetoric is how Trump is going to get other countries to make concessions on new trade deals that truly do benefit American workers?
He said Canada and Mexico are exempt for the time being and other nations could also seek an exemption if they are willing to negotiate a trade deal that is more fair for American workers. And other nations have every incentive to do so.
The U.S. is the world’s top consumer market and every manufacturer gains from producing to meet our endless, gluttonous needs.
Trump’s rollback on regulations and tax cuts are benefitting American workers. It is difficult to believe that he would pursue tariffs if they would harm those same workers.
However, there could be a downside to tariffs if trade deals are not done right.
A tariff is a tax on imports. That tax will be paid by every person who buys the now-more-expensive product. A higher price for one good means less money to buy other goods, which is not the formula for prosperity that Trump has espoused.
It is a risky manuver but the trade playing field does need to be leveled. One U.S. manufacturer after another has been destroyed by unfair foreign competition.
Trump met Europe’s threat of retaliation with a threat of his own: To slap tariffs on their autos. Currently, we impose a 2.5 percent tariff on European cars, but they have a 10 percent tariff on ours.
Way back in 1987, Trump wrote The Art of the Deal about how to be a winning negotiator and business dealmaker. The number one tactic he employed was to think big. Then he protected the downside and left the upside to take care of itself.
“I always go into the deal anticipating the worst. If you plan for the worst —if you can live with the worst — the good will always take care of itself,” he said.
Third on his list was maximizing options, followed by know your market and use your leverage.
“The worst thing you can possibly do in a deal is seem desperate to make it,” he said. “That makes the other guy smell blood, and then you’re dead.”
Trump’s next negotiating tactic, fight back, appears to sum up his determination with changing trade deals.
“In most cases I’m very easy to get along with,” he states in the book. “I’m very good to people who are good to me. But when people treat me badly or unfairly or try to take advantage of me, my general attitude, all my life, has been to fight back very hard.”
With that said, I will now assume my constitutional advocacy role.
The U.S. Constitution gives Congress, and only Congress, the power to regular commerce, but significant pieces of that power have been outsourced to the executive branch over the last four decades.
It is time for Congress to restore the check and balance on federal power by challenging this over-reach by the executive branch. The House and Senate need to act.
— RaeLynn Ricarte
Signing up for free trade agreements — in which international trade is left to its natural course without tariffs, quotas, or other restrictions — have long been one of the few legislative agendas with bipartisan support. Center or mainstream Democrats and Republicans alike have supported them for many years.
That bipartisan support is found in the opposition as well. Democrats and Republicans, left and right, have often stood in opposition to them: President Trump and candidate Bernie Sanders being among those who campaigned against them in the last election.
Some trade deals, like the World Trade Organization agreements to which most nations subscribe, set out general rules involving a host of issues like anti-dumping, customs valuation and pre-shipment inspection.
These agreements cover agriculture, application of sanitary and phytosanitary measures and a host of other details.Other agreements have been made between specific countries, like those the U.S. has between Israel (1985), Canada and Mexico (NAFTA, 1994), Jordan (2001), Australia (2004), Chile (2004), Singapore (2004), Bahrain (2006), Morocco (2006), Oman (2006), Peru (2007), the Dominican Republic (2007), Panama (2011), Colombia (2011) and South Korea (2011), as listed by Wikipedia.
The arguments for free trade are that they “level the playing field” between nations, allowing U.S. producers to market their products overseas without restrictions, and vice versa. Those who argue against free trade point out the loss of American manufacturing jobs to other countries, where wages are at rock bottom and working conditions so poor they would be unacceptable in the U.S.
Politicians on the left also point out that a lack of environmental regulations in other countries and the threat that poses for the global environment.
In short, those in opposition argue that free trade is good for corporate profits but bad for American workers and the global environment.
Economically, the era of broad trade agreements, passed with bipartisan support, has resulted both in economic growth and loss of jobs. The economic growth, or wealth accumulation, has been heavily concentrated among the rich, and the gap between them and the middle class has grown. In Oregon, many jobs have moved from labor and industry to service and tourism, which is fueling our homeless crisis: A person can only work so many low-wage jobs and costs have skyrocketed throughout the “economic boom” of the past few decades.
President Trump’s order that steep tariffs be imposed on imported steel and aluminum from every country except Canada and Mexico may well jeapordise those agreements.
But are Trump’s new tariffs good, bad or just ugly?
For the good, U.S. Steel said Wednesday that it is preparing to restart its steelmaking facilities and one blast furnace at an Illinois plant as a result. If U.S. Steel restarts part of its plant in Granite City, Ill., which has been out of commission for more than two years, the company could hire 500 workers.
For the bad, the many metal product manufactures creating things from imported steel and aluminum will be paying higher prices for raw material. That will likely include Sapa (formerly NW Aluminum specialties) in The Dalles. Will U.S. manufacturers of raw steel be able to meet demand?
In a similar move observed locally, a tariff was applied by the president to Canadian imports of paper back in January. Paper prices — including newsprint — have since been going up, and that price increase is impacting the printing industry nationwide. So far, it appears there are no paper manufacturing plants gearing up (or being built) to meet the demand so the price increase will likely remain, at least in the short term.
In the long-term, American re-investment in paper and steel manufacturing — at the very least we should be reprocessing the paper we “recycle” by sending to China — will be a good thing. But in the short-term, things could become pretty ugly for the industries in need of those products today.
And it is all going to get pretty ugly.
— Mark Gibson