The U.S. consumer is the loser with tariffs
With steel and aluminum tariffs now in effect against our closest trading partners, we may be heading to an all-out trade war. We hope not, but that possibility cannot be discounted. A trade war will not be good for either the U.S. or the global economy, and in the case with shooting wars it’s the common foot soldier who will pay the heaviest price. In real wars, it’s the guys on the front lines who get killed, wounded or captured. In a trade war it’s the average guy who loses his or her job.
As this newspaper has stated previously, a tariff with Canada has seriously impacted the print media in the U.S. Additional tariffs won’t help other sectors of the economy and could be the impetus that plunges our economy into a recession. The U.S. has enjoyed a lengthy period of sustained growth. It’s a matter of basic economics that we are overdue for a downturn. Economic behavior always follows cycles, and we’re long overdue for a downturn. A slight dip followed by a strong return might not be a bad thing, but it’s not wise to rock the boat with risky actions such as arbitrary tariffs.
Make no mistake about it, the U.S. has the most to lose in a trade war, and we don’t need to be the party to start it.
At midnight Thursday, the Trump Administration announced steep tariffs on metals imported from Canada, Mexico and the European Union. There’s a 25 percent rate on steel and 10 percent on aluminum.
This is almost certain to bring retaliatory action. Again, why rock the boat when you are in calm waters?
It’s not good when close allies such as Germany and Canada use such words as “illegal” and “inconceivable” in the wake of this. Mexico is said to be taking retaliatory action in the form of a long list of agricultural items.
Expect to pay higher prices in the grocery store or go without.
It appears that there’s some kind of strategy here to rewrite the North American Free Trade Agreement, better known as NAFTA. Agreed, NAFTA had its flaws, but it’s kind of late in the game to be renegotiating it. It’s like locking the barn door long after the horse is gone. But to be sure, it isn’t the presence of less-than-ideal trade agreements that has hurt our economy, it’s the absence of good ones. We didn’t lose textile jobs to Mexico or Canada, we lost them to countries we didn’t have trade agreements with. The relatively few textile jobs that are still left in the U.S. (yarn, denim, etc.) are here because of NAFTA, not in spite of it.
To have the advantages of free trade, the U.S., Canada and Mexico agree to certain rules. One country can’t manufacture a product from start to finish without importing something from one of the other parties. Mexico, for example, has to import yarn or denim from the U.S. before making blue jeans and shipping them across the border.
Some observers are mystified why action on tariffs is aimed at Mexico, Canada and Europe. They are not the problem, China is.
The biggest problem with tariffs is who pays them. It’s not a country that we’re importing products from. It’s the U.S. businesses and individuals who purchase those products. Your freedom of choice to purchase product at a lower rate is being denied.
Simply stated, a tariff is a tax. The government may think it’s making a point by doing it, but it’s the U.S. consumer that pays the price.
It’s not good. We hope it’s a temporary measure and that it doesn’t result in massive job losses.