Expect Trouble from Tariffs

Terry Schwadron
4 min readJun 2, 2018

Terry H. Schwadron

June 2, 2018

The consensus seems to suggest not just that President Trump’s announced tariffs will end up hurting Americans in higher costs, actual job loss and international isolation. In addition, the view from both Republicans and Democrats seems to be that Trump is missing the main target, China.

The gain: Trump is being true to his own gut and to his own campaign promises to be tough on trade imbalances as a main driver for American prosperity.

The losses: We seem on the way to a widening trade war with lots of nations, without sufficient U.S.-made goods to make a wild difference on the rest of the world.

The tariff road is already littered with announcements and counter-announcements, with threats made and abandoned against China, and instead moving ahead with tariffs aimed at U.S. allies like Canada, Mexico and the European Union. It took most of the ally less than a day to start announcing punitive prices on such varied products as Harley-Davidson motorcycles, bourbon, quiche (!), and agricultural products in return for U.S. tariffs of 25% on imported steel and 10% on aluminum.

For you and me, this is a discussion that seems hopeless lost in a theoretical fight over pursuing a White House policy of “American First.”

An article in Quartz, based on conversations with economists, says flat out that these tariffs could mean that more than 146,000 Americans will lose their jobs. This is ironic, since the monthly jobs report happened yesterday to reflect better-than-average job creation (though there was controversy because President Trump talked about the jobs report before it was released, priming the market response).

The magazine argued that while tariffs will save a few select American metals producing jobs, those will be far fewer than the jobs lost to tariffs.

The magazine noted That’s because steel manufacturers in the US employ far fewer people than industries that make things out of imported steel, like automakers. Just over 400,000 people in the US work in metal-producing jobs, economist Jed Kolko wrote in March. Four and a half million work in jobs that depend on metal.

The apparent last straw for the White House was the refusal of Canada and Mexico, which had been making progress towards an updating of NAFTA treaties, to agree to a clause that insisted even a new NAFTA would go out of business in five years, a message reportedly delivered in a phone call from Vice President Mike Pence. Canadian prime minister Justin Trudeau said that no responsible Canadian leader would ever agree to such a short-term deal governing manufacturing rules and trade.

In China, Commerce Secretary Wilbur L Ross, who constantly pooh-poohs criticism of the tariffs approach, is trying to set aside talk of tariffs with China in favor of higher purchase of American goods. Trump’s long-expressed goal has been to reduce the outstanding trade imbalance with all countries, China included.

Remarkably, Congressional Republicans have been pretty vocal about calling out the tariffs approach. Still, Trump has pretty much just ignored the unsought advice. “I disagree with this decision,” House Speaker Paul Ryan, a Wisconsin Republican who had quietly tried to convince Trump to hold back on the action, said in a statement. “There are better ways to help American workers and consumers. I intend to keep working with the president on those better options.”House Ways and Means Chairman Kevin Brady released a statement that said the tariffs “are hitting the wrong target.”

“When it comes to unfairly traded steel and aluminum, Mexico, Canada, and Europe are not the problem — China is. This action puts American workers and families at risk, whose jobs depend on fairly traded products from these important trading partners. And it hurts our efforts to create good-paying US jobs by selling more ‘Made in America’ products to customers in these countries,” the Texas Republican’s statement said.

From a national security standpoint, which is a point that Trump keeps using to defend American-made steel, the linkage of trade issues with security issues has left a huge rift between the United States and its closest allies.

So instead of working together on international security issues, the United States is pushing its friends away.

Some of this has never made sense to me, as I have written previously. Most imported car brands actually represent cares built in the United States, particularly in South Carolina and Alabama.

At the base of all of this is a campaign theory of economic nationalism that is neither practical nor economically sound, that is simplistic in a world of multi-national supply lines and parts, that may well be based on the personality-driven likes and dislikes of President Trump.

It does not sound like good news to me.