Opinion: Tariffs damage Michigan's economy

Michael Alaimo
A sign is seen at General Motors as they announced the closing of multiple facilities including the Warren Transmission Operations on November 26, 2018 in Warren, Michigan. - In a massive restructuring, US auto giant General Motors announced Monday it would cut 15 percent of its workforce to save $6 billion and adapt to "changing market conditions."
The moves include shuttering seven plants worldwide as the company responds to changing customer preferences and focuses on popular trucks and SUVs and increasingly on electric models.GM will shutter three North American auto assembly plants next year: the Oshawa plan in Ontario, Canada; Hamtramck in Detroit, Michigan and Lordstown in Warren, Ohio.In addition, it will close propulsion plants -- which produce batteries and transmissions -- in Baltimore, Maryland and Warren, Michigan, as well two more unidentified plants outside of North America. (Photo by JEFF KOWALSKY / AFP)        (Photo credit should read JEFF KOWALSKY/AFP/Getty Images)

Michigan faced serious economic obstacles in the aftermath of the 2008 recession and has worked diligently over the last decade to recover. But now the federal government is considering regulatory action that could erase the progress made in recent years.

The Trump administration has implemented steep tariffs on imported steel and aluminum in an effort to rebalance trade relationships with other nations. Unfortunately, this heavy handed approach indicates a lack of consideration for their retaliatory effects on domestic markets — especially the breadth of impact on the automobile industry.

Detroit’s relationship with automobile manufacturing sits at the core of its identity and economic heritage. It has a storied role as one of the state’s largest employers, contributing to the region’s revival in recent years. With 60 headquarter operations in the Detroit area alone, this industry supports over 180,000 jobs in a variety of positions along the supply chain, including assembly, engineering, services and much more.

Detroit’s auto-economy is underpinned by small- and medium-sized companies downstream of large part suppliers that resolve the numerous supply chain problems facing industrial America. This includes tool fabrication, mechatronics and metallurgy so large international companies have reliable access to the critical services and components to create a finished product from scratch. As vehicle electrification becomes mainstream, clean energy innovators are drawn to Michigan to take advantage of this enormous asset.

President Donald Trump, Canada's Prime Minister Justin Trudeau, right,  and Mexico's President Enrique Pena Nieto, left, participate in the USMCA signing ceremony in November 2018.

However, as a result of the interconnectivity between small-, medium- and large-sized businesses in the region, the financial consequences of tariffs policies by this administration has the potential to wreak havoc on companies at every level. Large corporations may survive but the small and medium businesses, those that are the backbone of communities across Michigan, will suffer.

Without free trade, or at least the reduction of tariffs on steel and aluminum imports, small and medium business owners will face dire consequences. Steel and aluminum tariffs will lead to increased raw material costs, as well as higher costs to consumers. As manufacturing plants lose profit over inflated costs of production, jobs will be cut and regional growth will be stunted.

In no place is free trade more important than in Michigan. Because they add unnecessary costs to the balance sheets of small business owners, tariffs threaten to damage an industry already struggling from unprecedented competition and change.

While the president’s desire to renegotiate trade imbalances is understandable, these actions only worsen market conditions. The recent signing of the United States-Mexico-Canada Agreement is an important step that needs to be taken to re-engage our most valued trading partners, but it still leaves Michigan with considerable uncertainty. Taxing an industry transitioning toward a new era of clean and advanced mobility threatens more than 180,000 jobs and an industry that exports $29.9 billion of transport goods. It deserves protection and support, not greater impediments.

Tariffs on fundamental materials needed for so many industrial products act as a tax on Rust Belt Americans, plain and simple. As automobile plants struggle to overcome the inflated costs of production caused by increased steel and aluminum prices, jobs will be cut and growth will be stunted. Hopefully this administration will continue to listen to the voice of America’s economic engine, and reverse course before it is too late.

 Michael Alaimo is executive director of Clean Fuels Michigan.