EDITORIAL

Half a Cheer for Trump

We’ll give it to Donald Trump that he followed up on a campaign promise to American steelworkers when he announced that he would put tariffs on foreign-made steel and aluminum imported into the US. But we fear that Trump, through his incompetence, likely will end up fulfilling the bad reputation tariffs have.

There is a role for tariffs in protecting American manufacturing capacity, particularly in targeting unfair foreign competition to the steel industry that has resulted in the closure of many American steel mills in the last 37 years. Trump justified putting tariffs of 25% on foreign steel and 10% on foreign aluminum, based on the national security grounds that the US should not rely on foreign producers. He undermined that justification somewhat by first including Canada and Mexico in the tariffs, then, after Defense Secretary Jim Mattis and Secretary of State Rex Tillerson reminded him that he risked damaging key alliances, announced that he would exempt Canada and Mexico from the tariffs — but only as long as there was progress in renegotiating the North American Free Trade Agreement. He tweeted: “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”

Robert Holleyman, deputy US trade representative under President Barack Obama, told Greg Sargent of the Washington Post that Trump’s stance could weaken the administration’s legal case that the tariffs actually are based on national security.

The US is the largest steel importer in the world. Canada, which exported 5.8 million metric tons of steel to the US in 2017, is the top source of foreign steel, according to a Commerce Department report, issued in January to document the problem of Chinese overproduction of steel. After Canada, the top US sources of steel are Brazil, 4.7 million; South Korea, 3.65 million; Mexico, 3.25 million; Russia, 3.1 million; Turkey, 2.25 million; Japan, 1.78 million; Germany, 1.37 million; Taiwan, 1.25 million; India, 854,026 million; and China, ranking 11th at 784,393 million.

US steel has the highest costs, at $684.11 per metric ton in 2017, while northern European steel was next highest, at $604.90. Chinese steel cost $572 but other Asian steel cost $534.75.

Some of Trump’s rural supporters are concerned about talk of retaliatory tariffs. John Heisdorffer, the president of the American Soybean Association, called the tariffs “a disastrous course of action from the White House” that could put farmers at risk at a time when the agriculture industry is already struggling. “We have heard directly from the Chinese that US soybeans are prime targets for retaliation,” he said, according to the New York Times. Soybeans are the United States’ biggest agricultural export.

However, some Democrats in industrial states supported Trump’s tariff announcement. “Good, finally,” said Sen. Sherrod Brown, a progressive Democrat from Ohio, as he cheered Trump’s move. Sen. Bob Casey of Pennsylvania, a Democrat who has called for Trump to resign, agreed.

“I urge the administration to follow through and to take aggressive measures to ensure our workers can compete on a level playing field,” Casey tweeted.

AFL-CIO President Richard Trumka also welcomed the tariffs. “For years, we have called attention to the predatory practices of some steel exporting countries. Such practices hurt working people and cheat companies that produce in the US. We applaud the administration’s efforts today to fix this problem.”

Tariffs have acquired a bad reputation in the era of globalism. In 2002, President George W. Bush imposed steel tariffs of up to 30%. But facing an adverse ruling by the World Trade Organization and retaliation by trading partners, he lifted them 15 months before the end of the planned three-year duration. Studies found that more jobs were lost than saved and Republican leaders vowed not to repeat the experiment.

The Trade Partnership, a research firm cited by pro-trade advocates, has concluded the same would happen with Trump’s tariffs. It estimated that the tariffs would create 33,464 jobs in the metals sectors but cost 179,334 jobs in other sectors for a net loss of nearly 146,000.

But Thom Hartmann, writing for AlterNet, wrote that tariffs might be needed to restore American manufacturing. When Ronald Reagan came into office in 1981, Hartmann noted, the US was the world’s largest importer of raw materials, the worlds largest exporter of finished, manufactured goods, and the world’s largest creditor.

“We bought iron ore from other countries, and manufactured it into TVs and washing machines here that we then exported to the rest of the world. And when countries couldn’t afford to buy our manufactured goods, we loaned them the money.

“After 37 years of Reaganomics, we’ve completely flipped this upside-down. Under neoliberal policies, we’ve become the world’s largest exporter of raw materials, the world’s largest importer of finished goods, and the world’s largest debtor.

“We now export raw materials to China, and buy from them manufactured goods. And we borrow from them to do it. This, by the way, is the virtual definition of a third-world country.”

Hartmann argues that we should charge an import tax – a tariff – on goods made overseas that compete with domestic manufacturers (particularly in essential industries), while keeping import taxes low on raw materials that domestic industries need.

As Hartmann says, we also should pull out of the WTO, NAFTA, CAFTA and other “free trade” pacts, if necessary, to restore sovereignty, and instead mandate that all purchases made with US taxpayers’ dollars be spent on goods and services provided by American workers employed by US-domiciled and incorporated businesses on American soil.

And the US government should support new and emerging industries through tax policy, direct grants and funding things like the National Institutes of Health, which funds most university research that leads to profitable new drugs for our pharmaceutical companies.

“Of course, such protectionist policies would not sit well with some of the multinational conglomerates, whose loyalty is not to America, but only to their investors and shareholders,” Hartmann noted. “A lot of them, like Trump with his Trump brand products, manufacture things in China or Vietnam and sell them here at a huge profit without giving a damn about the consequences of these actions to American workers.”

Josh Bivens, director of research at the progressive Economic Policy Institute, wrote in the New York Times, “The proposed tariffs can provide a countervailing force against these foreign subsidies and protect American metal producers until a comprehensive solution is found. Am I confident that the Trump administration will back a smart and efficient solution to the larger problem? Not really — but this doesn’t mean we shouldn’t be happy to have some breathing room to find one.”

Democrats should lend a veneer of bipartisan support to the president’s tariffs. They can take satisfaction knowing it gives heartburn to congressional Republicans and their multinational corporate sponsors. — JMC

From The Progressive Populist, April 1, 2018

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