Casualties of Trump's Trade War
The president's economic agenda is harming American businesses and consumers.
When White House economic adviser Gary Cohn showed up in the Oval Office earlier this year to give Donald Trump news of an excellent jobs report, the president's keen grasp of economics and policy instantly came into play. "It's all because of my tariffs," he replied, according to Bob Woodward's new book, Fear. Cohn had to inform him that the tariffs were not yet in effect.
Now they are, and the news is not so sunny. The Federal Reserve reported Wednesday that already, "tariffs are reported to be contributing to rising input costs, mainly for manufacturers," and worries about trade disputes have "prompted some businesses to scale back or postpone capital investment."
Eighty percent of the world's recreational vehicles are built in and around Elkhart County, Indiana, which voted for Trump by a 2-1 margin. When times are bad, people don't buy RVs, because they are a luxury, not a necessity. The Great Recession walloped Elkhart, which saw its unemployment rate hit 20 percent. Nine years later, the rate is 2.3 percent. But RV sales are falling and some plants have cut production to four days a week.
Why? Trump has imposed new duties on steel and aluminum, two commodities needed to build motor homes, campers, and the like. Elkhart-based Smoker Craft, which makes pontoon boats, said because of European retaliation the price of a typical new rig could climb from $30,000 to $37,000. Meanwhile, the tariffs imposed by Canada in retaliation have shriveled a market that previously accounted for a quarter of the company's sales.
"This is a really big deal for us," Elkhart county commissioner Mike Yoder, a Republican, told The New York Times. "We export a lot of product and import a lot of product. If this whole trade dispute expands much more, it has serious implications, and we will once again lead the country into a recession, without a doubt."
He has plenty of company in his anxiety, well beyond northern Indiana. A group of more than 80 trade associations representing U.S. farmers, retailers, toy makers, fisheries, tech companies, and others has launched a campaign with the slogan "Tariffs Hurt the Heartland."
New trade barriers do no good for them or their customers. The American Apparel and Footwear Association, which is part of this coalition, says, "we urge the American consumer to buy their warm winter clothing now, as it's shaping up to be a long, dreary, and bitter tariff season ahead." Parents in need of baby strollers and car seats "could see prices increase dramatically," warns the Juvenile Products Manufacturers Association.
The president's fixation on blocking imports and punishing trade partners, it must be said, is producing some worthy achievements. One is enlightening many people who voted for him in the mistaken belief that he knew what he was doing.
A new NPR/Marist poll found that his support is declining even in small towns, where 46 percent of voters disapprove of his performance, compared with 41 percent who approve. All this is before Trump follows through on his threat to slap fees on $200 billion of Chinese goods.
His trade war has also illuminated the value of free trade in ways that everyone can see. When a single industry or corporation laments the threat of foreign competition, it can point to the jobs it provides. The intended benefit—saving them—is obvious.
Granting it relief may raise prices, but not enough for most people to notice or object. Trump's broad increase in import taxes, by contrast, can't be ignored: It's too large and affects too many American companies. It could have hardly been designed more effectively to inflict palpable harm across a wide swath of the country and the economy.
But the benefits, if any, are exceedingly narrow. The steel industry, which stands to gain from the tariffs, employs only 140,000 people. Set that against more than 2 million farmers, 5 million retail workers, and 1.3 million auto dealer employees—all of whom stand to lose and many of whom realize it.
In the past, protectionism could be portrayed as a negative only for foreign companies. Now it's become clear that imports are a vital element in the functioning of the economy and that the government restricts them at our peril.
If the trade fight continues and expands, a lot of Americans will suffer from the effects, losing jobs and paying higher prices. Memo to the president: It's all because of your tariffs.