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Tags: china | gop | reagan

Trump's Trade Intentions Could Prove Costly

Trump's Trade Intentions Could Prove Costly
(Feng Yu/Dreamstime)

By    |   Thursday, 08 March 2018 03:50 PM EST

One prominent conservative columnist was brazen enough to call President Donald Trump’s proposal to substantially increase steel and aluminum tariffs "stupid." The Wall Street Journal editors called this the "biggest policy blunder of his presidency."

Both the Republican Speaker of the House and the Majority Leader of the Senate begged the president to reconsider, as did most GOP members.

Almost everyone criticized the president for saying his policy would be an "easy win;" but he did concede there would be "costs," only that they would be minimal.

The problem is that Trump tariffs favor a business sector employing 170,000 people, while the corporations using steel and aluminum employ 6 million. They will have to pay higher prices for raw materials making them less productive.

The 2002 steel tariffs cost Americans in steel-using industries 200,000 in lost jobs, more than total steel industry employment. Rather than increasing jobs overall as the president hopes this time, a study by Trade Partnership consultants estimates 33,000 new jobs as a result of a Trump-like tariff, but a net loss of 140,000 jobs in other industries to pay for higher steel and aluminum costs.

To enact his program without congressional approval would require invoking a rarely used "national security" provision of doubtful applicability. Since Canada is the largest steel and aluminum exporter to the U.S., and China only 11th, it is pretty tough to argue security as the justification. China only accounts for 6 percent of U.S. steel imports and would suffer less since it is already restricted by other trade restrictions.

And the U.S. would face reprisal from major trading partners. European Commission President Jean-Claude Junker threatened retaliatory tariffs against Harley-Davidson, Kentucky bourbon, and Levi’s jeans. He quipped, "We can also do stupid."

Canada purchases half of current U.S. steel exports and might shop elsewhere even when excluded.

On the other hand, no one should be surprised.

Candidate Trump promised to do something for steel workers. This is the something.

His most coherent political theme over many years has been to support America First against liberal-internationalist do-goodism and neoconservative world democracy-promotion as a means to stop them from undermining U.S. interests. He won and it is unreasonable to expect he would not try to fulfill his promises — and enact his programs.

Mr. Trump never claimed to be a free trader. To be candid my former boss Ronald Reagan was proud of his support for markets yet as president adopted protectionist policies for steel in 1984. He labeled them "voluntary" but threatened to end trade with foreign nations who did not volunteer.

The good news was his tax, regulatory, and spending restraints allowed the economy to offset their negative effects. Donald Trump may be counting on the same with similar policies.

The steel industry has changed too. China supplies half of world steel but it is costly to them with Chinese companies paying 50 percent more for power than U.S. manufacturers.

The U.S. is the fifth largest steel producer and its productivity has increased five-fold since the Reagan protection ended, going from 10 hours of work per employee to produce each ton of steel to only two hours today, with 144 U.S. plants in 2000 and still 93 in 2016.

To become world competitive U.S. steel turned massively to automation with fewer high-skilled workers to do the work efficiently but limiting the need or likelihood for future increases in employment.

On the other hand, many foreign nations tax U.S. imports and subsidize their own industries — very much including steel and aluminum — to obtain an unfair advantage. Worse, previous U.S. administrations have negotiated trade agreements to U.S. disadvantage, especially on labor and environmental matters disguising them as benefits rather than costs. Attempting to reverse these should get free-market supporters’ enthusiastic approval.

Conservatives have every right to disagree with President Trump on trade as they did with President Reagan. In fact, the U.S. has the world’s most open trade policy and it is the world’s most successful.

The freer the market, the better it is for all. Trade helps keep America first.

Conservative free traders should stick to the facts, present the better arguments, and minimize the damage. Indeed, these have resulted in modifications already. No administration is perfect. Trump’s has been better than most on regulatory and tax matters and we should work to improve the administration's policies rather than simply calling names.

Donald Devine is senior scholar at the Fund for American Studies, the author of "America’s Way Back: Reclaiming Freedom, Tradition and Constitution," and was Ronald Reagan’s director of the U.S. Office of Personnel Management during his first term. For more of his reports, Go Here Now.

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Conservatives have every right to disagree with Trump on trade as they did with Reagan. The U.S. has the world’s most open trade policy and it is the world’s most successful. The freer the market, the better it is for all.
china, gop, reagan
Thursday, 08 March 2018 03:50 PM
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