The Trump aluminum and steel tariffs seem to be on the news nearly every day. One day it’s a go and the next day whose knows. This is pretty much the same back and forth with nearly every policy that is recommended or push by the White House and the current administration. It’s not all such a bad thing, as it is obvious that the current administration is pushing the envelope on many policies that have not necessarily favored the US and jobs here. On the other hand, it’s clear that not all good ideals are necessarily good for everyone.
So, the obvious question should be who stands to benefit and who stands to lose from these tariffs? According to an article in Bloomberg, the obvious winners are the US steel producers such as Nucor Corp., AK Steel Holding Corp. and US Steel Corp. who have aggressively lobbied against what they call unfair competition from China, Russia and South Korea. With Trump’s and the secretary of commerce announcement to impose tariffs, both steel and aluminum prices in the United States have gone up before taking effect. The strange thing is that these countries previously mention are not the biggest importers of steel to the US, instead it is our neighbors Canada, Mexico and Brazil. Yes, countries that are in the Americas, of which will imply that it would have a negative effect to their economies and potentially drive more immigration to US who would then seek to employ workers who have the necessary skills in the steel industry and who can potentially be employed for much less. The 19,000 estimated jobs that will increase in this sector, may in fact be filled with immigrant workers and not necessarily ‘blue collar Americans’ as the White House seem to predict. Let’s be honest here, are manufacturers really in the business to produce at higher cost?
Now, there are obvious losers in this battle of the steel… For one the auto industry will see a huge increase in their most basic prime materials which are steel and aluminum, bottling companies such as Coca Cola and Anheuser-Busch InBev NV (here’s an extra tax on your nice cold canned beer). Other major losers are the US construction industry and essentially every manufacturer from the little ‘mom and pop’ companies to the airplane industry such as Boeing. Lobbyist from these companies have been pleading to the White House that these tariffs’ will mean increase manufacturing cost, increase in cost for consumer products (you lose when you go to buy), and the loss of thousands of jobs in the various other sectors of the economy. Some estimate as much as 90,000 jobs which would have a net negative affect on employment in the US.
No doubt the US is in a drastic point in its economy, and the President knows it. The fact is that we accumulate debt faster than we can print money. Same goes for other economies around the world, and it’s all coming to a head on collision. For many administrations, the issue of debt is to borrow more and push it on to the next administration, the good old “as long as it doesn’t happen on my watch” when contemplating the potential of economic collapse. So, it’s hard to read Donald Trump, as many say he is “all over the place”. One thing is certain, is that despite some of his controversial issues, he is attempting to do something, only that every action taken regardless of which decision he makes will not be without consequence. In fact, no decision could be just as harmful for the US economy. The legitimate question regarding the proposed tariffs is how is the United States of America going to benefit from these decisions (including our international relationships), verses possibly three companies?
Perhaps it would be easy to end this article with an open-ended question, but it will probably be more responsible on our part to at a minimal make some constructive suggestions on how to move forward. There’s no doubt that tariffs on aluminum, steel and “oh yeah” solar (we decided to throw solat in the mix) have a negative affect on US consumers. So instead, why not take advantage of today’s low cost to invest in the future? Now, surely there are many out there that can think of a few ways this can be done. For one, the low steel and aluminum prices can help increase the availability of the new age of automobiles with higher fuel efficiency, electric vehicles and rebuild many of our much-needed bridges across the nation (this sounds like ‘blue collar jobs’). Let’s reduce our dependency on oil and increase solar energy production and storage. Many economists are so focused on the increase of salaries as a significant measure of prosperity, but how about if instead the cost of living was to decrease? What would happen if we were to enter into a deflationary market instead? Isn’t the end game to have more for less? There’s no doubt that this will have devastating effects on the markets, but it wouldn’t be a new concept either, and eventually everything settles and it’s back to growth again. Then, the right answer would look more like ‘America First’ should in fact be a new version of the ‘Buy American Act’. One which will tailor the use of tax dollars for American own businesses as the first alternative unless there are no equivalent comparable supplier domestically for products under government contracts. In the other hand, allow current manufacturers and consumers to have the ability to purchase through the free market. Competition is after all a positive motivator of innovation to create efficiency and new technologies especially in automation. On the other hand, if we’re so concerned about losing high end jobs, then why are we shipping intellectual property overseas, like in the case Apple. The world is shrinking, and this is no doubt a pivotal moment. Multiple things can be implied when government intervenes with free market by imposing tariffs. It could mean that the US is simply not self-sufficient in certain sectors of the economy, or that the quality of US products don’t justify their market cost. It could be the need to repay political favors, and/or simply help close the gap of the excessive government spending. Of course, it could also be a combination of all the possible reasons.
Without a doubt Trump’s agenda is packed with self-preservation for US interest. Some a bit more controversial than others, and often many of his comments justifying his agenda are not what we can call of US interest. Comment below on what you think the US should focus on as far as economic development and your opinion of trade tarriffs?
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