The Costs of Tariffs
March 19, 2018
This past year, the United States has been experiencing a welcome surge in economic growth. The economic successes America is enjoying is surely due to the hard work and ingenuity of the American people, the implementation of the Republican tax reform and President Trump’s initiative to bring American companies back home. In general, free trade contributes to our national prosperity as well. However, having open markets is not an invitation for others to take advantage of us. When bad actors exist, we have every right to use our power to protect our interests. I agree with President Trump that the U.S. is engaged in bad trade deals that were negotiated during previous administrations, and it is time to renegotiate the terms to support our own economy. The President’s recent announcement of tariffs addresses some of the issues the United States has with certain countries. Although I support taking action against some countries, we must be careful with the broadly-based terms of the President’s proposal. It could punish our friends and allies that we rely on and have existing, productive trade partnerships with. We must ensure that we target our actions carefully on countries and practices that violate current trade law.
President Trump’s plan aims to protect the steel and aluminum industries, both of which support the production of a wide range of products – everything from cars to construction materials to our national defense. The President has proposed a 25% tariff on steel and a 10% tariff on aluminum imports, citing the interest of our national security and economic well-being. Although it is important that the U.S. address the abuses in trade practices from its global partners, a broadly-based tariff could severely harm relations between the U.S. and countries like South Korea and the United Kingdom. Furthermore, a hefty tariff like the ones proposed affect large corporations and small businesses in the U.S. Cars and machinery, such as tractors and trucks used for the agriculture industry, would certainly see a rise in prices. As such, higher prices for machinery purchases, overhead costs and more could eventually result in job losses as industries pivot to pay increased rates for raw materials.
Fortunately, Canada, a key NATO partner and ally, has been exempted from the tariff proposal, as well as Mexico. Canada is the largest exporter of aluminum to the U.S. for defense and industrial purposes. Of the total imports, 16% of steel and 41% of aluminum are from Canada. But with increased tariffs and trade restrictions applied to other allies, damage could be done to relationships and good will needed from other countries’ participation in our diplomatic and military partnerships. As the United States begins to advance its strategy with North Korea, we would deeply hurt our key partner in South Korea should we alienate them with pricey tariffs. Tariffs and trade restrictions could also put a strain on alliances the Pentagon relies on for other missions vital to our national security. If allies like the U.K. and France ultimately face these tariffs, it could make them less likely to contribute funding to NATO or support sanctions against our adversaries like Iran, Russia and North Korea.
Tariffs could also have an adverse impact on Oklahoma and the country’s agriculture industry. In addition to a rise in prices for farm production equipment like tractors, mills, processors, trucks and more, other trade partners may retaliate with their own tariffs. Consequently, the rise in production costs will have an impact on produce and canned goods. That impact will be felt by American families who will have to pay the price of costlier goods.
The U.S. can and should target the bad actors in our trade relations that cause economic harm to American suppliers. But we cannot alienate strong trade partners that we have in countries like Canada and Mexico. And furthermore, we cannot hurt the American competitive edge. Congress has developed strong relations with President Trump to push forward good legislative initiatives. Congress should continue to work with him and further improve our trade practices and policies while protecting our own interests and national security.