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Brief #24—Economics

Policy Summary
The Trump administration’s tariffs on Chinese imported goods have been problematic for both U.S. manufacturers and consumers. These policies have been numerous, adding up to billions of dollars’ worth of Chinese manufactured goods that U.S. companies depend on being severely affected. They’ve also prompted China to implement retaliatory tariffs of their own. When President Trump threatened to add an additional $200 billion in tariffs on other Chinese imports, one of the U. S’s largest companies panicked.

On September 5th, Apple penned a letter to United States Trade Representative Robert Lighthizer voicing its concerns regarding the proposed tariffs. According to them, these further tariffs on imported Chinese goods will cause a significant increase in prices of products such as the Apple Watch, the Apple Pencil, and the Airpod headphones. Computing devices would also be affected, as would various chargers, cables, and adapters. Apple provided a detailed list of the goods and company operations that would be affected by these tariffs, going so far as to provide the exact tariff codes that accompany each category.

“Our concern with these tariffs is that the U.S. will be hardest hit, and that will result in lower U.S. growth and competitiveness and higher prices for U.S. consumers” the letter stated.

President Trump was quick to respond to Apple’s concerns with a proposed solution. He tweeted “Apple prices may increase because of the massive tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting!”

As of now, Apple has issued no direct response to Trump’s statements.

It should also be noted Apple is not the only American company to express their discomfort with the Trump administration’s tariffs on goods imported from China. Automobile manufacturing giant Ford recently announced that it would be abandoning previous plans to ship their Focus Active, a hatchback-style vehicle, to the U.S. from China. The reason for this change in operation was attributed to the Trump administration’s tariffs.

Trump tweeted a response to Ford’s announcement that echoed the same sentiment he had expressed to Apple –” Ford has abruptly killed a plan to sell a Chinese-made small vehicle in the U.S. because of the prospect of higher U.S. Tariffs. CNBC.  This is just the beginning. This car can now be BUILT IN THE U.S.A. and Ford will pay no tariffs!”

Ford did not agree with this, though. They responded that manufacturing the Focus Active in the U.S. would not make economic sense, as it would not be profitable.

Analysis
In their letter, Apple also brought up the subject of economic benefit, arguing that these impending tariffs could “ultimately reduce the economic benefit” that they generate for the U.S.

Their concern is certainly valid, and applies to other companies as well. Apple is not the only technology company that would feel the effects of such policy shifts. The hearings conducted on the subject this past August on Capitol Hill saw over 300 companies testify that these tariffs would likely be dangerous not just for them, but for their entire industry. Were they to be implemented, many prominent companies within the technology sector would be forced to raise the costs of their products when the parts that they imported from China became more expensive.

When the tariffs on aluminum and steel that sparked the trade war were first implemented, Trump made the claim that they would generate further manufacturing jobs. The opposite quickly proved to be true, however, as many American companies either shifted their operations overseas, such as Harley Davidson, or were forced to lay off numerous workers, such as the Mid Continent Nail Corporation. If we have learned anything from the early stages of the trade war, it is that tariffs do not create American jobs.

As the trade war has progressed, it has become increasingly clear that Donald Trump either does not understand the continuously negative effects his tariff policies have had on his country’s jobs or simply does not care. They have also crushed innovation which stands to happen again if these further tariffs on Chinese imports are implemented.  The early tariff policies that wreaked havoc on the solar panel industry spelled the end of many startups that could no longer afford to import parts that they depended on. The looming further tariffs on Chinese imported goods is poised to produce the same effect on the many startups in the technology sector, one of the fastest growing and most innovative industries in the U.S.

While switching manufacturing operations to the U.S. would also mean a significant increase in labor costs, companies seem considerably more concerned about the prospect of rising production costs. Analysts have indicated that were all iPhones to be built in the U.S, each individual phone could cost as much as $1,000. While it may be the best-selling consumer device in the country, it seems a safe assumption that significantly fewer Americans would be able to spend that much money on a mobile phone alone, ultimately leading to declines in profit, which as we have seen throughout the trade war, often ends in workers being laid off.

While the prospect of more manufacturing jobs in the U.S is certainly appealing and a prospect our government should focus on, attempting to strong arm companies into moving entire operations to American soil out of fear does not seem to be the way of bringing back the jobs that Donald Trump has boasted about since before taking office. If he wants to bring jobs back to the U.S., he should start by lifting the tariffs implemented by his administration and letting American corporations expand their operations through increased production, research and development. When industry experts speak out on such an important subject, he should listen.

Resistance Resources:

This brief was written by USRESIST NEWS Economic Policy Analyst Samuel O’Brient: Contact  sam@usresistnews.org

Photo By chuttersnap

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