Tariffs affect international business, local jobs
Proposals being discussed on the global stage could have a significant impact on the economy and jobs here in Southeast Michigan.
More than 18,700 local residents are employed by more than 40 companies headquartered in France. All of us are keenly tuned into talk of trade and tariffs, which could affect our ability to continue living and working in this community.
On June 1, the United States decided to impose steel and aluminum tariffs (respectively +25 percent and +10 percent) on several of its allies including France and the rest of the European Union, triggering threats of retaliation with tariffs on U.S. goods.
One of the immediate consequences of such tariffs is going to be a rise in the price paid by the consumers for a large variety of goods. Some grades of steel and aluminum are very specific and can not be found in the North American market. These specific metal grades will continue to be imported, while the restriction of competition for the rest of the grades will encourage U.S. manufacturers to raise their prices. Sales of U.S. goods affected by the European tariffs will decline and may create a metal surplus at home and collapse in market prices triggering restructuring.
Although long term consequences for the economy are still not yet fully known, the consensus is that in the short term, it will create some disruptions that will affect growth and wealth generation. This is not good news, but none of this is catastrophic either as European exportations of steel and aluminum to the U.S. represent only a small fraction of the global trade between the two partners.
The risk for our respective economies is “trade war” rhetoric gets out of control and, in an effort to appeal to the nationalistic and protectionist fibers in both societies, our political leaders bargain too much. With the history of the “domino effect” around World War I, leaders could push the economy into a recession nobody wants or expects.
The automotive sector is of particular importance to Michigan, the French American Chamber of Commerce’s Michigan Chapter and its members. Prospects of tariffs up to 25 percent for importation of light vehicles could create a significant downturn in the local economy. In 2017, Americans imported 8.3 million vehicles for $192 billion, out of which 2.4 million came from Mexico, 1.8 million from Canada, 1.7 million from Japan, 930,000 from South Korea and 500,000 from Germany. At the same time the U.S. exported 2 million vehicles for $57 billion. Beyond the national boundaries, globalization has blurred corporate interests, and the first ones affected by a rise in tariffs could be the U.S. carmakers that rely on Mexico or Canada production to supply their domestic market.
We hope that trust and cooperation will prevail, divergent interests can be reconciled and common ground found. What needs to be avoided at all costs is being “backed into a corner” that ultimately leads to an all-out trade war and results in a recession.
Cedric Ballarin is president of the Michigan chapter of the French American Chamber of Commerce.