John Norquist
Norquist

Trump Tariffs Will Hurt State Workers

Manufacturers like Harley will suffer, as when a steel tariff was imposed in 2002.

By - Feb 2nd, 2017 01:19 pm
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Yesterday, President Donald Trump proposed that the country impose tariffs on steel and aluminum. This column by former Mayor John Norquist, originally published in February of last year, explains why this would damage Wisconsin manufacturing.

The problem with imposing tariffs is that the most likely imports to be restricted are products Wisconsin needs and doesn’t manufacture.

For example, consider the American steel industry. For decades it has relentlessly lobbied the federal government to impose tariffs and quotas on its international competition. What happens if higher steel tariffs are imposed? The effect would vary from state to state. Indiana produces more steel than any other state. So even though Indiana has many more jobs devoted to making finished products from steel, it does actually make steel and at least its steel producers could raise prices and therefore financially benefit from restrictions on imports of steel. Of course the Indiana businesses buying steel would pay higher prices; so high that their customers might not stay with them. Wisconsin, by contrast, has no steel mills, but has a large base of manufacturers who make finished steel products. So a Trump tariff on steel would be painful to the Wisconsin economy.

President Trump repeatedly attacks trade as a threat to American jobs. His rhetoric has been almost purely protectionist since first announcing his campaign. Blaming foreigners for job losses resonates with many Americans especially when supporters of trade are quiet. Arguments for trade seem complicated and are difficult to make in the heat of elections. Of course Trump is not the only one to warn against trade. Bernie Sanders did it. Hillary Clinton changed her pro-trade position during the campaign. Almost no prominent politicians make the case anymore for free trade Barack Obama and Rep. Paul Ryan (R- Janesville) have been exceptions to the rule.

The spread of trade fear usually originates with older industries that are in decline, often for reasons that have less to do with trade than with industries clinging to outmoded business practices or technology. The raw metal, textile and maritime industries are examples of businesses that continually lobby for protection from foreign competitors. But probably the most obsessed lobbyist has been the steel industry. Author James Bovard in his book Fair Trade Fraud describes the industry’s intense tactics to gain tariff protection; How the steel manufacturers involve themselves in  campaigns and full court lobbying of Congress. Instead of trying to serve their customers they push for help to raise prices on them.

If you read the steel industry’s press releases they always claim to be on the verge of extinction, victims of economic warfare waged against the U.S. by “enemies” such as Japan, France, the UK, Sweden, Brazil and sometimes even Canada. This despite the fact that the proportion of steel consumed in the U.S. that is also made in the U.S. has not dropped below 60 percent since the 19th century. Steel is heavy and it’s expensive to ship overseas which acts like a natural tariff on steel.

The Steel Lobby has had success at establishing some tariffs and quotas. They may be about to gain much more. Trump named steel industry lobbyist Robert Lighthizer as U.S. Trade Representative. And when campaigning in Ohio and Pennsylvania Trump repeatedly indicated he’ll seek trade protection for US steel producers. This is bad news for Milwaukee manufacturers who use steel to make valuable products, including Master Lock, Harley Davidson and Briggs and Stratton. Steel is not made in Wisconsin so raising its price will only hurt the many manufacturers here who buy it. Tariffs will also raise prices for construction including that of state and local government for streets, roads, buildings and bridges. Will anyone speak out? Will Wisconsin’s Congressional delegation stand up for the interests of the private and public sector in the state, who will both be hurt?

The issue will be hard to take on because in the 2016 election almost no one defended trade. Trump and Sanders blamed trade for US job losses even though job growth has been sustained in every month since January 2010. Clinton backed off from her defense of trade early in her battle with Sanders. With Trump’s victory and his appointment of Lighthizer, higher duties on steel may be just around the corner.

House Speaker Ryan and Western Wisconsin Congressman Ron Kind ( D- La Crosse) have a history of supporting free trade. Will they adhere to their position and if they do will others follow? Democratic Congressional representatives Gwen Moore of Milwaukee and Madison’s Mark Pocan will likely be pressured by organized labor to support tariffs even if the tariffs hurt Wisconsin. And Republican Congressmen will feel pressure to side with their Republican President. None of this pressure will be sympathetic to the negative effect of trade barriers on Wisconsin manufacturers. Moore should consider that steel tariffs will not only hurt Milwaukee businesses, but also the Port of Milwaukee. One of the most profitable operations at the Port handles imported steel.

We’ve seen this scenario before. In March 2002 the George W. Bush administration imposed tariffs that averaged 30 percent on steel produced in Norway, Switzerland, Japan, South Korea and the European Community. Manufacturers who buy and use steel complained, pointing out that there are 57 jobs making products from steel for every job making steel itself. Those jobs are at risk, they said, “if users have to pay more for steel and raise prices,” because the finished goods made in America will be less competitive. During the 2000 Presidential campaign Bush promised protection to steel makers in Pennsylvania, Ohio and West Virginia and as Bloomberg reported, Bush’s team felt boxed in by their promises and so levied the tariffs.

Several companies, including Milwaukee Wrought Washer and Milwaukee Paper Machinery, were forced to suspend some of their operations when they lost access to steel they needed from overseas. The problem wasn’t just price, but availability, as foreign steel makers couldn’t ship product until they knew it could be legally delivered. Milwaukee Paper Machinery, which exports equipment that makes food and drink containers, uses some alloys of high-grade steel that aren’t even made in America. They had to get it from Finland and the Finns couldn’t send it while the Bush’s trade restrictions were pending. Without the steel they were forced to suspend much of their production. Milwaukee Wrought Washer similarly was forced to lay off workers, who were ironically enough represented by the United Steelworkers Union, which at the national level supported the restrictions that cost their Milwaukee members work. As the Milwaukee Business Journal reported, the price hikes induced by the Bush tariff hit many Wisconsin businesses hard. “It’s ridiculous,” said Irv Palmer, president of Manutec Inc., a steel fabricator at 2475 W. Hampton Ave., Milwaukee. “We just can’t believe the increases we are seeing. There’s some gouging going on.”

President Bush’s move ultimately damaged relations with international trade partners, contributed to a temporary domestic steel shortage and allowed U.S. producers to ramp up their prices to the detriment of American businesses that rely on steel, according to a 2003 study by Laura Baughman and Dr. Joseph Francois of the Trade Partnership Worldwide economic consulting group. After a year and a half of facing intense domestic and international pressure, Bush came to the right conclusion and lowered the tariffs.

President Trump used trade to help win the Presidency and soon his actions may cause Wisconsin manufacturers and their workers to lose market share. Let’s hope Wisconsin’s delegation defends Wisconsin and the nation’s interests by opposing trade protection.

John Norquist served as Mayor of Milwaukee from 1988 to 2004. 

More about the Trump Tariffs

19 thoughts on “Norquist: Trump Tariffs Will Hurt State Workers”

  1. JJ says:

    This is what is called inside the box thinking. Yet another sanctimonious lecture on how we can not possible end free trade. The argument here against tariff protection is that there will be microeconomic disruptions and losers. Therefore we should ignore the macroeconomic advantages tariffs would bring. Put another way large gains that tariffs would bring should be forfeited because of small loses. We have a trade deficit. The inescapable fact of having a trade deficit is that international trade produces a net loss to the United States. Tariff will produce a net gain.

    This can be seen in the real world experience of the United States with tariff protection. From 1816 until 1967 we were the most tariff protected nation on earth. The Boogie Man did not get us. Instead we prospered. We will again.

  2. Frank Galvan says:

    Only morons don’t know this already. Unfortunately, we have a significant minority percentage of morons spread out amongst gerrymandered States with Republican Jim Crow laws in place.

  3. Tim Tomann says:

    You all realize it was targeted + 1000cc heavy motorcycle Tariffs +44 percentage that President Reagan signed into law 1983. That gave breathing room for Motor Company that (Harley-Davidson) so they could retool, right their quality control issues, involved all levels of the company. With coming up with ways to survive wow did it work. They went from days away from BK to being one of the most successful Worldwide Brand. Riden’ and Loved by millions across the world. link: http://www.nytimes.com/1983/04/02/business/us-raises-tariff-for-motorcycles.html

  4. Rich says:

    Thanks for that insight, JJ, but you are aware that the global nature of supply chains is entirely different now than it was during the years you cite, right? Sometimes, the past is not the best predictor of the future.

  5. Diane Buck says:

    Hey, John, what about Charter Steel in Milwaukee? It produces steel!

  6. john norquist says:

    Diane Buck: Charter produces a small amount of steel for their own use. If big steel tariffs are imposed Charter will save some money by not having to pay higher prices for the steel they use. They have protected themselves from protectionism.

    Tim Toman: Yes Harley sought and received tariff protection. To Harley’s credit they also voluntarily gave it up well before its expiration date. It may have saved Harley, but its CEO at the time (Vaughn Beals) said keeping the tariff on any longer would have badly weakened Harley just as keeping a cast on too long atrophies muscle.

  7. JayS says:

    Free Trade ? Familiar with the VAT (Value Added Tax) ?

    I believe the countries in Europe assess VAT on ALL goods sent by the USA and imported to Europe. The USA does not assess a VAT on domestic production or goods imported from Europe (or from anywhere, for that matter).

    Our neighbor, Mexico currently subjects USA goods to a 16% VAT.

    It’s impossible to have ‘free trade’ when goods traveling one direction (USA –> Mexico) are subject to VAT and goods going the other direction (Mexico –> USA) are not subject to the same VAT. The VAT is anti-free-trade.

    Me thinks politicians define ‘free trade’ differently than Economists;good luck fixing that.

  8. John Casper says:

    JJ,

    Your comment is “what is called the box” not “thinking.” It’s “yet another sanctimonious lecture on how we can not possible(sic) end” fair “trade.”

    You wrote, “The inescapable fact of having a trade deficit is that international trade produces a net loss to the United States.

    It’s only “inescapable” if you can’t count and are opposed to liberty and democratic capitalism. Sorry you never heard of the Boston Tea Party. http://www.history.com/topics/american-revolution/boston-tea-party

    Economists love imports. The exporter takes all the risk. It’s their labor, their materials, their natural resources and environment and their time. They exchange their goods for U.S. dollars which are a public monopoly.

    We can run out of clean water, safe food, sustainable energy, some metals, minerals, and medicines, but not dollars. If the U.S. borrows in something other than dollars, gold, oil, …. all bets are off.

    Conservatives and liberals understand that “(Federal) Taxes For Revenue Are Obsolete.”

    http://www.huffingtonpost.com/warren-mosler/taxes-for-revenue-are-obs_b_542134.html

    Economist Pavlina Tcherneva’s four-page “Antidote to Deficit Phobia” is excellent. http://media.wix.com/ugd/f4c1a3_6b35b43a6aba48028d77f08750e05382.pdf

    Local and state governments are different. Their budgets have to balance, just like a family’s.

    You wrote, “Therefore we should ignore the macroeconomic advantages tariffs would bring.”

    Japan has posted huge trade surplus for decades.

    1. Why isn’t their economy dominating the world?

    2. Why is the U.S. dollar still the world’s reserve currency?

    3. Who will receive the “macroeconomic advantages you claim from banning imports?”

    4. Do you see a resurgence of labor unions?

    90-second video of President Reagan saying no “freedom,” without “collective bargaining.”

    “These are the values inspiring those brave workers in Poland, the values that have inspired other dissidents under communist domination, who have been willing to go into the gulag and suffer the torture of imprisonment, because of their dissidence. They remind us that where free unions and collective bargaining are forbidden, freedom is lost… They remind us that freedom is never more than one generation away from extinction. You and I must protect and preserve freedom here, or it will not be passed on to our children and it will disappear everywhere in the world. Today, the workers in Poland are showing a new generation how high is the price of freedom, but also how much, it is worth that price. I want more than anything I’ve ever wanted, to have an administration that will through its actions, at home and in the international arena, let millions of people know, that Miss Liberty, still lifts her lamp beside the golden door.”

    http://bloggingblue.com/2015/03/ronald-reagan-collective-bargaining-freedom-video/#comment-146867

    You wrote “From 1816 until 1967 we were the most tariff protected nation on earth.”

    5. Do you have a link?

    During the Civil War, the North blockaded Southern ports, so they couldn’t export cotton.

    5.1 Until the U.S. has a trade surplus, do you want to cut the defense budget so our tax dollars aren’t used to keep the sea lanes open?

    6. If you’re desperate to export, what do other countries have of value that you will take as payment?

    Fair trade is exceedingly complex. It goes to the heart of democratic capitalism, not the money manager/crony capitalism we have. Trump and Sanders were correct to oppose the Trans Pacific Partnership. The U.S. and other western nations have exported slave wages and an environmental holocaust to many of our trading partners. That’s created immense wealth for a very few. Slave wages means those workers can’t afford to buy our exports.

    Please apologize to Mayor Norquist.

  9. john norquist says:

    Jay S: Many nations assess a VAT ( Value Added Tax). A VAT is levied on imports as well domestically produced products. It’s a tax on consumption regardless of where the product is made. Mexico’s 16% VAT applies to both imports and Mexican made products. It acts like a sales tax. It does not disadvantage US exports to Mexico.

  10. JayS says:

    john norquist- I think this article does a reasonable job, better than I could in this limited space, of explaining how the VAT disadvantages the US in free trade: http://www.wnd.com/2007/02/39999/

    Remember free trade requires treating all goods, traveling in both directions similarly. The current structure of VAT does not allow bilateral tax treatment of goods between a country with a VAT and one without VAT.

  11. Tom D says:

    JayS (post 10):

    Your WND article is incorrect. Take their example of how Germany’s 16% VAT affects the price of a $23,000 car…

    If the $23,000 car is made in the US and then exported to Germany, it is hit with a 16% VAT ($3,680) when it arrives in Germany, bringing its retail cost up to $26,680.

    This is ENTIRELY FAIR since a $23,000 car built in Germany would be subject to that SAME 16% ($3,680) VAT. The only difference is that the German car is taxed incrementally at each stage of production while the American car is taxed all at once, but the tax in EACH CASE totals the same $3,680.

    To summarize… in Germany, a $23,000 (manufacturing costs plus profit) American-made car retails for $26,680, and a $23,000 German-made car retails for the SAME $26,680. What is unfair about that?

    VAT is also fair for imports INTO America. If that $23,000 German car (which, because of VAT, retails for $26,680 in Germany) is exported to America and sold in Wisconsin (5% sales tax), Germany rebates the $3,680 VAT, allowing the German car to be sold in Wisconsin for $24,150 ($23,000 plus $1,150 sales tax).

    This is the SAME $24,150 PRICE that the $23,000 American car sells for in Wisconsin. Again, totally fair and non-discriminatory.

  12. Terry says:

    Harley Davidson is ALREADY struggling mightily. Trump’s tariffs and trade wars are only going to make things much worse for them and a whole lot of other people. You people that voted for this charlatan were suckered.

    Dump Trump
    Dump Walker

  13. Jake currently of the MKE says:

    True. The average income of a Harley owner is 80,000 a year and is the same demographic for conservative Republicans, which is old and greedy, who are getting older.
    Harley does not make an affordable bike, nor am I a fan of the rightwing fake rebel deplorable Harley attracts.

  14. Troll says:

    This time, though, the tariffs went the other way. “When they send a motorcycle to India, as an example, they have to pay 100 percent tax—100 percent,” Trump told U.S. governors on Monday. “Now, the [Indian] prime minister, who I think is a fantastic man, called me the other day. He said, ‘We are lowering it to 50 percent.’ I said, ‘OK, but so far we’re getting nothing.’ So we get nothing, he gets 50 [percent], and they think we’re doing—like they’re doing us a favor. That’s not a favor.”

    https://www.theatlantic.com/international/archive/2018/03/us-india-trade/554321/

  15. Troll says:

    How much steel is there in a Harley Davidson? 500 lbs.- so your looking at a $100 dollar increase and a can of Cambell soup, one penny increase. Trump won by grabbing a majority of blue collar workers. Hillary won the River Hills pinheads.

  16. Eric J. says:

    What do you think the typical Harley motor,shock tubes rims are made of ? ( Answer : AI )

    -The suburban Harley rider/”rebel” is getting old .( Take off the bandana,the vest and grubby jeans and they are just another suburbanite)
    – Not an admirable stereotype to millenials.

  17. Terry says:

    Well thank God Trump’s advisor and good buddy Carl Icahn got to dump his 31 million in stock in the Manitowac Company just before Trump announced his idiotic return to tariffs, mercantilsm and trade wars. Another win for Wisconsin thanks to Trump!

    https://www.washingtonpost.com/news/business/wp/2018/03/02/shortly-before-trump-announced-tariffs-his-former-adviser-dumped-millions-in-steel-related-stocks/?utm_term=.f350cebebf74

    These Republicans are greasy and dumb as the come folks.

    Dump Trump
    Dump Walker

  18. Troll says:

    On a bright note to you tofu loving lefties guns should become more expensive. Tack On a dollar due to tarrifs

  19. RK says:

    Tammy Baldwin’s on board when it comes to steel:

    https://www.youtube.com/watch?time_continue=30&v=9_zp3DWwKzg

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