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Brief #18—Economic Policy

Policy Summary
As the trade war continues throughout the U.S. and through many nations beyond, citizens everywhere continue to feel its effects. While some have argued that there are no winners in a trade war, recent gains in the U.S. stock market might serve the case against such an argument. S&P 500, Nasdaq and the Dow Jones Industrial Average have seen two straight weeks of gains according to recent reports.

For those in lower economic brackets, though, the effects of the recent tariffs have not been so positive. The 22 percent tariff on imported newsprint paper has caused significant problems for many in the independent publication sector. In Owosso, Michigan, the owner of the Owosso Argus-Press, a local, family operated newspaper, is anticipating a hit of up to $30,000 following the spike in costs of paper. This trend is not unique to small papers, though. Florida’s The Tampa Bay Times has seen its operating costs rise by as much as $3 million following the tariffs.

That said, the effects of these tariffs seem almost small when compared to those felt by companies in industries dependent on aluminum and steel. When the Trump administration announced the imposition of these tariffs in June, the outcry was global. Mexico, Canada, and the European Union responded with force. Mexico was quick to announce that it would be implementing new tariffs of their own on certain products including various types of flat steel and tubes as well as meats, fruits, and cheeses. One of the top steel exporters to the U.S, Mexico made it clear that it did not feel the tariffs imposed by the Trump administration were justified. China, meanwhile, announced that it would levy significant tariffs designed to effect the U.S. with a focus on agricultural goods such as soybeans, fish, and pork.

These international tariffs are not designed to only target agricultural companies, though. Some U.S. companies are feeling the impact of the steel and aluminum tariffs more than once. Florida-based boat manufacturer Correct Craft has been affected by both domestic and global tariffs. The Trump administration’s aluminum tariffs have also led to increases in prices of the American-manufactured steel used by many boat makers, as have the retaliatory tariffs imposed by international competitors, leading to a decrease in revenue and with it, a loss of opportunity to expand operations and hire more workers.

The steel and aluminum tariffs are continuing to negatively effect more larger companies as well.  Poplar Bluff in rural Southeastern Missouri is a town whose economy is driven by the nail manufacturing giant Mid Continent Nail Corp. The recent tariffs have caused a 25 percent spike in prices of the steel that the company continously imports from Mexico. This has prompted an increase in product prices, leading to the loss of considerable customers followed by 60 layoffs with many more expected to follow. A media spokesperson has described the company as being on the “brink of extinction” and reports indicate that it could be forced to close its doors by labour day or sooner if policies are not changed quickly.

While some companies are forced to face the reality of shutting down, others are trying to save face by shifting production overseas.  The most prominent example is Harley Davidson. For decades a symbol of American manufacturing, the motorcycle maker announced in late June that it would shifting part of its production to Europe. When the E.U. announced it would be raising its tariff on American manufactured motorcycles from 6 percent to 31 percent, Harley Davidson opted to move some operations overseas rather than increase the prices of their products to cover the $90 to $100 million burden that would be imposed on an annual basis by the new tariff.

Analysis
There can be no doubt that the effects of the trade war brought on by the Trump administration are significant and it seems as though they are not likely to slow down in the near future. President’s well documented interest in pulling the United States from the World Trade Organization further supports the theory that the effects of the trade war are likely to continue, for small and large businesses alike.

It is not only businesses who are feeling these effects, though. Citizens are beginning to notice increased prices in consumer goods across many industries that can no longer be ignored. This is hardly surprising as these tariffs have driven up operating costs for companies that manufacture and produce almost every type of consumer good. The inevitable effect of this is increased operating costs, higher product prices and as a result, worker layoffs. When a company’s bottom line is negatively effected, every other aspect is never far behind. While demand may be remaining robust, supply is not, as the problems for supply chains and employment resources remain continuous.

A further negative effect of the trade war for many businesses has been the lack of predictability that has accompanied the recent tariffs. It has led to significant instability, problematic declines in investor confidence and slumps on investments necessary for growth within many industries. Investors throughout the U.S. are opting to delay investment decisions, causing further negative ripples throughout the national economy.  Without the necessary investment capital, many companies are unable to add to their capacity for production, often leading to layoffs.

So far, the focus of the Trump administration regarding the tariffs seems to be aluminum and steel. This has led to the theory that they may not understand the broadness of the impact that their policies have had and continue to have. The harm that has been done to the U.S. economy cannot be ignored and so far, there is nothing to indicate that they are concerned with the significant layoffs throughout factory driven communities nor the drag on capital investments caused by the instability and declines in investor confidence.

This trade war has turned our former trade partners and allies into rivals whose tariffs are having further negative effects on the U.S. economy. From the looks of it, it is likely that the impact of these tariffs will be felt across the country and beyond for the foreseeable future.

Resistance Resources:

  • World Trade Organization is an international organization created to regulate world trade.
  • #KnockEveryDoor is an organization created to recruit and train volunteers to get involved with discussions on policy related matters to enact positive change.
  • Global Trade Magazine is a leading publication and voice on all things related to global trade matters.

This Brief was developed by USRESIST NEWS Analyst Samuel O’Brient: Contact  sam@usresistnews.org

Photo by: Kyle Ryan

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