NAFTA

President Trump’s embrace of new tariffs on steel and aluminum imports is largely believed to be behind the exit of his top economic adviser, and one free market advocate is concerned that it could hurt American consumers and stunt the nation’s economic growth spurt.

Last week, during a meeting with executives from America’s leading steel and aluminum manufacturers, Trump announced his new policy.

“We’ll be imposing tariffs on steel imports and tariffs on aluminum imports.  Pretty much all of you will be immediately expanding if we give you that level playing field, if we give you that help,” said Trump in announcing 25 percent tariffs on steel imports and a 10 percent surcharge on foreign aluminum.

The policy comes as little surprise, since Trump routinely condemned what he characterized as terrible trade policies with the likes of China and Japan and vowed to revive American manufacturing by addressing America’s trade posture.

However, Texas Public Policy Foundation Senior Economist Dr. Vance Ginn believes tariffs are the wrong policy for Trump to pursue.

“I think this would be bad for Americans overall and reduce our economic potential over time, which had been boosted by the tax cuts last year and the regulatory reforms that were made.  I’d rather see those sorts of things boosted instead of tariffs and trade practices such as this,” said Ginn.

Ginn says the simple fact is that charging more more imports means higher prices for all of us.

“If you raise the cost of doing business, that hurts business and it hurts American consumers.  Whenever you look at raising steel prices and aluminum prices, those are in the cars that we drive and the buildings where we work and in many other aspects of capital throughout our economy,” said Ginn.

He also says we were reminded just last decade in the George W. Bush administration that steel tariffs don’t necessarily get the intended results.

“Some estimates show that cost us about 200,000 jobs.  I would hate to see more Americans not have a job when we’ve had an expanding economy,” said Ginn.

Commerce Secretary Wilbur Ross estimates that the steel tariffs would result in a bump of one half of one percent to three-quarters of one percent, an average of about $700.  He says the difference is “trivial.”

Ginn says that approach badly undermines the administration’s defense of the tax cuts.

“If $1,000 is just crumbs according to Nancy Pelosi but a big deal according to those in favor of the tax cuts, $700 is also a big deal.  That takes away a lot of the potential from those bonuses that they had before to [add income],” said Ginn.

But with significant trade deficits and China dumping steel into this country in violation of World Trade Organization protocols, the U.S. stands at a tactical disadvantage.

Ginn says that doesn’t explain why the tariffs apply to everyone.

“The proposal so far would be a global tariff on steel and aluminum.  It wouldn’t just hit China.  So if there are those issues with China, let’s deal with those, not necessarily make it for everyone to pay these higher costs,” said Ginn.

Ginn also says the effort to reduce our trade deficits starts with a tough look in the mirror.

“Let’s look at what we’re doing here at home that’s also maybe raising the cost of living and raising the cost of doing business such that China and other countries are having a competitive advantage in the global market,” said Ginn.

“Let’s look at the cost of unions and what they’re doing to the cost of labor over time.  Let’s look at our minimum wage and what that’s doing over time.  Retirement pensions.  There are a number of factors that are raising the cost here that are putting us at a disadvantage compared to other countries,” said Ginn.

Ginn believes America’s position on the global trading stage is already on the upswing thanks to the tax reform bill.

“That helps to reduce the cost of doing business.  It allows us to be more competitive on a global playing field.  I think we should look at more of those things, along with regulatory reforms,” said Ginn.

According to Ginn, the way to help an economy flourish is not to add more complications but to remove as many as possible.  He says it’s led to a booming economy in Texas.

“The ability for us to focus on freedom and free markets has allowed us to be a powerhouse.  As an independent nation, we would be the tenth largest economy in the world and continue to create a lot of jobs.  In fact, over the last decade, we created 26 percent of all new jobs that were added in the United States,” said Ginn.

President Trump’s negotiating tactics often show him throwing out an idea, watching his critics set their hair on fire, and then finding common ground with a less severe approach.  Ginn suspects that is Trump’s approach here, as well as an effort to put the heat on officials renegotiating the North American Free Trade Agreement, or NAFTA.

“He’s even talked to the Mexicans and the Canadians and said, ‘Look, if we don’t get something done with NAFTA, then I’m definitely going through with these tariffs.’  That puts pressure on the NAFTA renegotiation process as well.  I’m hopeful this is not where we’ll be at the end of the day,” said Ginn.

Ginn contends NAFTA could be much better but is not as destructive to the U.S. economy as its critics suggest.  He says free trade ought to be the ultimate goal.

“What would be a perfect trade agreement?  It would be no trade barriers between the countries that are involved.  Instead, we have a 1,700-page trade agreement with NAFTA.

“So what does that do?  That picks winners and losers throughout the whole economy.  There’s a lot of ways to renegotiate to make this more of a free trade agreement.  I’m just a little concerned that’s not where we’re going to go if we start picking out even more winners and losers in the process,” said Ginn.