Trump Tariffs Will Hurt State Workers
Manufacturers like Harley will suffer, as when a steel tariff was imposed in 2002.
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.
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.
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.
- Murphy’s Law: Trump Tariffs Slam Wisconsin Economy - Bruce Murphy - Jun 29th, 2020
- Baldwin Calling on Trump Administration to Take Action and Support Wisconsin Hardwood Businesses Hurt by Trade War - U.S. Sen. Tammy Baldwin - Feb 25th, 2020
- Trade War Wounds May Heal Soon - Erik Gunn - Feb 21st, 2020
- How China Trade Agreement Impacts Wisconsin Farmers - Miranda Suarez - Jan 16th, 2020
- Trump Tariffs Have Cost State $800 Million - Miranda Suarez - Dec 10th, 2019
- U.S. Senator Tammy Baldwin Seeks Investigation into Possible Market Manipulation Regarding Market Bets Timed to Trump’s Comments on Trade War & Other Geopolitical Events - U.S. Sen. Tammy Baldwin - Oct 21st, 2019
- Port Milwaukee Shipping Up in 2019 - Danielle Kaeding - Oct 21st, 2019
- Stuck to Gallagher: Does Your Party Care About Small Business? - State Rep. Amanda Stuck - Oct 10th, 2019
- Evers Blasts Trump “Tweet” Trade Wars - Erik Gunn - Sep 16th, 2019
- Donald Trump’s Administration Laughs in the Face of Struggling Farmers - Democratic Party of Wisconsin - Aug 13th, 2019
Read more about Trump Tariffs here