Trump’s steel tariffs worry Michigan gov hopefuls

Jonathan Oosting
Detroit News Lansing Bureau

Lansing – Some candidates competing to be Michigan’s next governor are concerned that President Donald Trump’s new tariffs on steel and aluminum imports would hurt industries in the state they want to lead and create a trade war with wide-ranging implications.

Trump almost three weeks ago announced 25 percent tariffs on foreign steel and 10 percent tariffs on foreign aluminum, a move his administration says is designed to benefit domestic producers. The president temporarily exempted Canada and Mexico as leverage to renegotiate changes to the 24-year-old North American Free Trade Agreement.

Experts have warned the tariffs will drive up steel costs and hurt states such as Michigan, where auto industry demands have fueled metal imports. Agricultural industry leaders here also fear that other countries could retaliate by slapping tariffs on U.S. food and other exported products.

Republican Gov. Rick Snyder, who has said a NAFTA collapse would be bad for Michigan, hasn’t had as much time to study the new tariff scheme but is “encouraged” by Trump’s decision to exempt Canada, Michigan’s largest trade partner, said spokeswoman Anna Heaton.

The state’s next governor will inherit an economy that may be heavily affected by the tariffs, which are scheduled to take effect this week. The temporary exemptions for Canada and Mexico will last as long as the president sees fit, according to the White House.

Democratic hopefuls Gretchen Whitmer, Shri Thanedar and Abdul El-Sayed say they support renegotiating trade deals to benefit Michigan workers but fear the new tariffs — and the way Trump announced them — could have long-lasting consequences for the state.

“This is Michigan, the state that builds things — where we make cars out of steel, and anything that drives up costs for our automakers or costs them jobs is going to hurt Michigan families,” Whitmer said in a statement.

Trump’s “disorderly rollout has caused unnecessary chaos that could hurt our workers, our industries, and provoke a trade war that will hurt Michigan's economy in the long run,” said the former Senate minority leader from East Lansing who was endorsed Monday the United Auto Workers union. “I’m watching this and the NAFTA negotiations closely.”

Republican candidates Bill Schuette and Brian Calley stopped short of criticizing Trump but noted some broad implications of tariff policies. State Sen. Patrick Colbeck’s campaign said he is a free trade advocate but thinks it must be done fairly.

“While no one wants to start a trade war, Michigan and American workers and paychecks have suffered because of Chinese goods flooding the market with products like steel, aluminum, dishwashers and silicone chips,” said Schuette spokesman John Sellek.

The attorney general from Midland believes Trump has his “own, aggressive style” and is working to rebalance trade relationships to benefit American workers and improve the economy, which “will be an ongoing process,” Sellek said.

Calley opposes “across-the-board tariffs” that could hurt major Michigan industries and threaten the state’s economic progress, said campaign spokesman Mike Schrimpf. But he supports “targeted efforts to stop the subsidized dumping of steel and is encouraged to see that trading partners like Canada are exempt from the tariffs.”

Impact on Michigan

The president’s decision to temporarily exempt Canada, the nation’s leading supplier of imported steel and aluminum, could lessen the impact. But experts project that a broader tariff on metal imported from any country could hit Michigan hard.

Michigan accounts for 3.8 percent of the nation’s metal imports, according to the nonprofit Tax Foundation, which estimated an across-the-board tariff could cost companies here a combined $340 million in 2018. The taxes would affect business decisions and could “eventually be passed on to consumers through higher prices,” according to the analysis.

Ford Motor Co. has said it buys the “vast majority” of its steel and aluminum from the United States but fears the tariffs “could result in an increase in domestic commodity prices — harming the competitiveness of American manufacturers.” General Motors Co. has said it buys more than 90 percent of its steel from domestic suppliers and is confident it could adapt to any long-term market changes.

The country had 143,000 steelworkers at the start of this year. By comparison, Michigan alone had 185,300 auto manufacturing jobs in January, according to the Michigan Bureau of Labor Market Information and Strategic Initiatives. The Michigan auto employment number doesn’t include service-related vehicle jobs in engineering and other specialties, said state employment analyst Bruce Weaver.

The Agricultural Leaders of Michigan last Monday blasted the tariff plan, warning that other countries could respond by slapping taxes on products such as pork, soybeans and dairy products that local farmers export.

History shows that agriculture “seems to bear the brunt of these retaliatory actions,” said Jim Byrum, president of the Michigan Agri-Business Association.

Trump’s rhetoric, threats and tweets about tariffs “put uncertainty in the minds of international customers, and that damages our supply chain, damages our relationships we’ve built over a long time and puts us at a competitive disadvantage,” Byrum said.

Republican House Speaker Paul Ryan has said he disagrees with the tariffs, but the European Union has threatened to retaliate by taxing imports of Harley-Davidson motorcycles built in his home state of Wisconsin.

What Democrats fear

Trump, the first Republican presidential candidate to win Michigan since 1992, campaigned against unfair trade deals and promised an aggressive effort to favor domestic companies and workers. U.S. Sen. Bernie Sanders of Vermont focused on similar issues in Michigan en route to his surprise victory over Hillary Clinton in the 2016 Democratic primary.

While many Democrats also want to renegotiate NAFTA and other trade deals to focus on American workers, they say the president’s tariff plan could backfire and hurt Michigan.

“As prices go up because of the cost of steel in a car, the chances increase that companies could cut jobs to preserve their corporate profits,” said Ann Arbor businessman Shri Thanedar. “I understand the risks associated with foreign companies dumping products on the market, but we must do something to ensure American industry remains competitive.”

Free trade agreements have been “almost entirely negotiated by corporate tycoons without workers at the table,” said former Detroit health director Abdul El-Sayed, but Trump’s new policy is “rash, poorly thought out and could hurt American workers.”

“The right trade solutions need to be rigorous, backed by strong economic policy and systematic,” El-Sayed said. “This is Trump-style bluster and will likely lead to a trade war that will ultimately hurt the American worker even more.”

In initially exempting Canada and Mexico from the tariffs, Trump has also said countries like Australia, “that also are very much involved with us on trade” might also be spared from tariffs, citing a favorable trade balance between Australia and the U.S.

The threat of tariffs had upended talks about restructuring NAFTA. Automakers have warned the Trump administration about the risk and disruption of pulling out of the trade agreement. Trump has vowed to do just that if Canada and Mexico balk at his terms.

Detroit News Staff Writer Keith Laing contributed.