It seems evident that President Trump will need a blockbuster economic revival if he hopes to win reelection in November.
Part of the equation to achieve that spring back is to resist trade protectionist temptations. But will he?
While everyone likes the sentiment of bringing manufacturing jobs back to America, trade barriers have never been beneficial. What has been useful for Trump as more than 1 million blue-collar jobs have come back to these shores has been a competitiveness burst by cutting taxes, slashing regulations, etc.
But protectionism against our friendly trading partners has started to rear its ugly head.
Here are three stark examples. First, steel and aluminum tariffs keep rising, and these have added to the costs of everything from beer to cars to building a new home. The Peterson Institute estimates the tariffs (mostly against Canada) cost consumers upwards of $900,000 — multiple times the salaries of the workers. Now, beer and soft drink producers are claiming a shortage of cans, which will drive up prices at the grocery store.
Another emerging multibillion-dollar trade brawl involves mattresses and whether to allow their importation. Led by Leggett & Platt, Corsicana Mattress Company, and Elite Comfort Solutions, domestic companies are trying to manipulate U.S. trade laws and unfairly protect a dominant market share. It’s a case study in corporate welfare under the guise of “protecting jobs.”
On March 31, this cadre of manufacturers filed multiple petitions alleging that the importation of mattresses from strong U.S. allies and trading partners in Southeast Asia is causing material injury to the domestic mattress industry. It’s a baseless claim, not to mention one laced with irony as many of the petitioners, such as Tempur-Sealy, have expanded and watched their sales soar by nearly 20% in the current conditions.
If these companies succeed in securing the trade barriers, mattress distributors (and retailers that import materials from partner countries such as Thailand, Malaysia, and Vietnam) would see oppressive tariffs placed on their goods. It will eliminate thousands of domestic jobs, shrink margins for retailers, and significantly raise prices for consumers.
A recent survey published in CivicScience found that “71% of Americans indicated they are at least somewhat concerned about the impact of recent trade policies and tariffs on their household expenses in the month of April.”
The mattress manufacturers have tried this ruse before. Many of these mattress manufacturers have paid hundreds of millions of dollars in hefty fines for attempts at price-fixing and violating antitrust laws in the past.
The U.S. Department of Justice recently raised the issue of higher costs and asked trade officials to “take the competitive effects of the ongoing pandemic and its likely aftermath — including potential effects on mattress prices for hospitals and other consumers and whether domestic supply can meet current demand — into account when assessing the extent to which domestic industry may be harmed by the conduct alleged in this case.”
Finally, there is the case of phosphate fertilizers. Mosaic, a domestic supplier, is requesting taxes on imported phosphate fertilizer of 71.5% for imports from Morocco and 31% for imports from Russia in response to alleged foreign subsidies.
The American Farm Bureau Federation warns that “if these duties are imposed, production costs to farmers across the country for corn, soybeans, cotton, wheat, and other crops will increase for the next planting season.” The Agricultural Retailers Association adds, “Granting this petition will very likely limit fertilizer supply options for America’s farmers and ranchers and increase their input costs.”
In each of these cases, consumers and some domestic producers get shafted and pay the price — this at a time when people are squeezed financially. It all comes when China should be the target, given Beijing’s rising threat to our economic and national security.
Even Trump conceded that point in a recent interview with the Wall Street Journal when he said, “This is not the moment to engage in new trade fights with allies.”
In this time of hopefully swift economic recovery, the Trump administration would be wise to resist special interest trade protection rackets and concentrate on rebuilding American jobs through tax cuts and deregulation — which worked before and will work again.
