When President Trump said that trade wars “are good, and easy to win,” he hadn’t consulted with officials from Ford Motor Company. The only Detroit automaker that hadn’t come to Uncle Sam for a bailout during the financial crisis is getting to the point where it could really use one now, and it’s all because of Trump’s trade policy.
You might think of Ford as just the sort of company Trump is trying to help out with his protectionist policies. Ford has been a manufacturing mainstay going back to the very invention of the automobile.
But the company that once spawned the Mustang and the Model T is now talking about laying off 12 percent of its global workforce amid an economic boom. How can this be? It’s because Trump’s tariffs. combined with other countries’ retaliatory tariffs, are taking an enormous bite out of Ford’s profitability.
[Read: Republican convenes hearing to highlight Trump tariffs’ damage to auto industry]
As we predicted repeatedly, the metal tariffs that Trump imposed with a thin pretext of national security have fallen heavily upon the many U.S. manufacturers that use metals as an input. These manufacturers — the people who make everything from cars down to cans — create and sustain far more American jobs than do the few remaining American companies that actually manufacture steel and aluminum.
In Ford’s case, the company has lost $1 billion in profit due to tariffs overall. That’s nearly one-quarter of the revenues that the tariffs have generated so far. But whether auto manufacturers import their steel and pay the actual tariffs, or they pay higher prices for domestic steel thanks to the tariffs (as is mostly the case with Ford), it is the consumer and the American manufacturer who pay the higher price.
[More: Trump tariffs kill Ford’s plan to import Chinese-made crossover]
What’s more, it’s worth remembering that Trump’s tariffs are high taxes. They fall on Americans, who will figure out sooner or later that the tax relief he won for them with the GOP tax reform package is trickling back out of their wallets in the form of higher consumer prices due to Trump’s tariffs.
This should all demonstrate the perils of government intervention in free markets. Capitalism works well when businesses make money selling what consumers want. It doesn’t work well when government steps in to punish those who supply demand and subsidize those who (like today’s farmers) are caught in the crossfire of such bad policy.
Instead of punishing and subsidizing, Trump should be taking his hands off the wheel. He should be breaking down trade barriers by helping farmers make money the honest way again, like they did before his tariffs. He should stop preventing manufacturers from paying competitive world market prices for the inputs they use, and from exporting their products abroad to a friendly reception that doesn’t include retaliatory tariffs.
