By Tim Grady, Manufacturing Talk Radio
Before you read any further, let me define “stupid” as opposed to ‘ignorant’. Ignorant, in my definition, is being unaware of things such as facts or the obvious. Stupid is being well aware of the facts or the obvious and choosing to ignore them. In my view, the Trump Tariffs are stupid for a myriad of reasons:
- Tariffs have never worked to benefit any country. They have been used since George Washington first spoke as a U.S. president in favor of protected industries
- Tariffs have usually made things worse overall for the manufacturing industry as a whole with even large producers like automotive experiencing the adverse impact of, in this case, the cost of steel and aluminum
- Tariffs benefit the few, in this case – Big Steel, at the expense of the many, like any company currently using steel, aluminum or component parts from China, Canada, Mexico, Russia, or other countries that have agreed to quotas (which will make the supply chain even more lean and uncompetitive)
- Tariffs cause prices to rise and demand to fall – the simple law of supply and demand still applies in a free market economy, but the vicissitudes of the cycle become amplified by cost increases and supply shortages
- Tariffs are a partial stimulant to inflation, especially in a booming economy where inflation always rears its ugly head in the latter stages of an economic cycle, which the U.S. is now approaching
- Tariffs do not support a free market economy; they create a protectionist economy manipulated by the central government that flies in the face of a free market
- Tariffs, as they are currently being applied, are not for ‘national security’ in general, except for steel and aluminum in particular – maybe; all the other parts and products being whacked with tariffs have nothing to do with ‘national security’ but rather a ridiculous and unnecessary stand-off
- Tariffs will make rebuilding America’s infrastructure much more expensive for the American taxpayer; there are already other Acts, such as the Buy American Act of 1933, that can be used to ensure that infrastructure steel be American-made
- Tariffs on steel and aluminum resulted in Big Steel restarting old blast furnace plants, not investing in new mini-mill production because new plants will take years to build and go into production long after the tariffs have been rescinded and international competition returns to the market
- Tariffs cost jobs in the country that imposes them – the USA is now seeing the bleeding edge of tariffs cutting into U.S. workers with the Tax Foundation estimating that nearly 50,000 jobs have already been lost or are scheduled for layoffs and up to 250,000 or more will be lost by the end of 2018 and early 2019, while the balance of 2019 may cause related job loses to rise to over 400,000
- Tariffs are not pin-point punishment for China stealing the intellectual property of U.S. companies that chose to produce in China
- Tariffs will not create or restore a trade balance between our trading partners – the USA has the largest economy in the world and the finest quality goods in high demand overseas; the reciprocal simply isn’t the case for any of our trading partners so a 1:1 parity on imports and exports is just not achievable
- Tariffs may get a country like China to open more of their country to U.S. products, but you generally don’t build a relationship with a customer by poking them in the eye to get their attention while simultaneously shooting your own foot off and screaming, “There, take that!”
It is almost sickening to go on and on about a ‘trade strategy’ that was doomed from the outset and will likely sway both the mid-term elections this November and the chances for Trump’s re-election in November of 2020, by which time this economic cycle will have played out and the country will likely be in a recession.
And it is not just manufacturing that is taking the hit. Non-manufacturing, which the ISM reports as 78% of our economy, is beginning to feel the pain. People being interviewed on Manufacturing Talk Radio are saying that their company cannot get orders from potential manufacturing customers in some cases because manufacturing is growing uncertain about the short-term and long-term impacts of the Trump Tariffs. That means fewer orders, less need for people to fulfill orders, and looming layoffs in non-manufacturing, as well.
Thus, the conclusion here is that the Trump Tariffs are stupid as a trade strategy, but the Administration will somehow frame them as a ‘big win’ when they lose enough jobs and enough face which forces them to rescind the tariffs. Now, if someone can come up with a rosey list of reasons why the Trump Tariffs are good for the U.S. – with real facts and not just bloviating, please enlighten me because from my point of view on manufacturing with its inevitable ripple effects into non-manufacturing, this will not end well for making America great again.
The views expressed in this article are those of the writer, and not endorsed by Manufacturing Talk Radio, the Metals & Manufacturing Outlook ezine, or MBC.