Trump vs. American Manufacturing on Tariffs

In spite of his frequent assertion that he has his ear to the needs of corporate America, Donald Trump has certainly made a habit of going against what it wants. The President’s latest policy to have stirred up animosity from the White-Collar world is one which will may also result in significant consequences for Blue-Collar America as well. Since last month, Trump has aggressively pushed tariffs on imported steel and aluminum, punitive measures aimed at the Chinese, the leading global traders of both materials. While the tariffs appeal to his base, who have long lapped up his vilifying of the People’s Republic, the effects of these tariffs will likely be felt by average Americans while leaving Chinese manufacturing mostly unscathed.

Excepting those occupying the executive ranks of American steel and aluminum producers, Trump’s tariffs have been received poorly by the corporate world. On Wall Street, the announcement led to massive sell-offs. Trade groups representing the metal manufacturers — the American International Automobile Dealers Association, the Beer Group, and the American Chemistry Council — have been particularly vociferous in their opposition to them, with the ACA warning that the tariffs will result in greater operating costs for factories and slower rates of corporate innovation.  

Reception to the tariffs among conservative economists has been similarly negative; many analogize them to a tax on low-income families, warning that American consumers would be the most affected by them. Rising prices for Chinese steel and aluminum will threaten American jobs whilst simultaneously raising production and consumer costs.

The effects of historic tariffs would seem to support this argument: In the 1970s, the Nixon administration’s 10% surcharge on all foreign imports resulted in a period of “stagflation,” with prices on various goods surging while overall manufacturing faltered due to fears of reduced profitability. George H.W. Bush imposed tariffs similar to Trump’s on foreign-made steel in the 1990s, and such measures likely hastened the decline of American steel production as manufacturing costs became prohibitively expensive.

China, for its part, does not even produce most of the steel bought by Americans. That distinction belongs to Canada. In response to this latest round of tariffs, Canada and Mexico are threatening to impose tariffs of their own. Such actions would represent a significant threat to the economies of all three nations, NAFTA and their trade partners in the global market. If the broad consensus on the effects of the tariffs are correct, they will be harmful to both Trump’s base and the business sector.

There is reason to believe that the President could reverse his position if they produce these expected outcomes. Although his political brand has been largely based on protectionism, even the staunchest of anti-globalists would likely find these policy outcomes inexpiable. In the short term, however, it appears that American manufacturing and the American people are going to suffer the consequences of the President’s aggressive approach to global trade.

Kuk James is a member of Class of 2021 at Dartmouth College.