Our Editorial: Tariffs will hurt autos, workers
Perhaps American consumers aren’t overly concerned that the steel and aluminum tariffs being considered by the Trump administration will drive up the cost of automobiles. But how do they feel about beer?
For beer sold in cans, the cost of aluminum represents roughly half of the purchase price. The tariffs President Donald Trump are threatening on imported steel and aluminum will significantly push up the cost of America’s favorite beverage.
Of course, those beer drinkers can always switch to glass bottles to avoid the impact.
But purchasers of American-made automobiles don’t have such flexibility. Steel accounts for about 25 percent of the production cost of an automobile. Steep tariffs designed to bolster U.S. steel and aluminum production will add hundreds, if not thousands of dollars to the sticker price of vehicles.
Higher prices equal fewer sales, and fewer sales will mean decreased employment in an industry that has been one of the major drivers of America’s current economic surge.
The tariffs, if approved, threaten to negate the benefits manufacturers gained from the recent tax cuts, and will work against Trump’s announced goal of sustaining an above 3 percent annual economic growth rate.
Throughout history, protectionism has more often been associated with economic slowdowns than robust growth.
Trump promised to attack unfair trade practices as a candidate, with China as a particular target. U.S. steelmakers believe, and the Trump Commerce Department concurs, that foreign imports are undercutting domestic production and placing at risk an industry that is essential to national security. The finding of such a security threat sets in motion the option to impose tariffs and quotas to help domestic producers.
But the finding is suspect.
As the Wall Street Journal reports, the United States has diverse import sources for steel and aluminum. Canada, a friendly neighbor, accounts for 43 percent of aluminum imports, and is a reliable producer of the high purity aluminum coveted by defense contractors. It’s hard to envision a scenario in which Canada cuts off the U.S. from aluminum supplies.
U.S. manufacturers also have ample unused capacity. Steel mills are operating at 72 percent of peak production; aluminum smelters at 39 percent.
Since the passage of the tax cuts, the president has touted their impact on luring American companies, including manufacturers, back to the United States.
But these tariffs will surely send producers who rely heavily on steel and aluminum searching for facilities in countries that don’t inflate prices with tariffs and import limits.
For automakers, who have stabilized domestic production over the past few years and are now beginning to grow it, the imports will make it more attractive to keep their foreign facilities operating.
The Trump administration, as part of the rewrite of the North American Free Trade Agreement, also has expressed a desire to use tariffs to punish automakers for importing vehicles instead of making them at home, and to force them to increase the content of made in the U.S. components.
Like the steel and aluminum tariffs, such protectionist measures will ultimate lead to fewer jobs and higher consumer prices in this country.
The economy is cooking along nicely under current trade policies, and that’s something the president loves to brag about.
If he hopes to keep it hot, he should follow the old adage, “If it ain’t broke, don’t fix it.”