WASHINGTON – To hear President Trump tell it, "tariffs are the greatest."
Most economists will tell you exactly the opposite. As Trump's tariffs take hold in the heartland, there's actually mixed evidence as to their effect so far.
That's likely because we're still early in a battle that pits the United States against, well, much of the rest of the industrialized world.
Economists fear the long-term impact of the trade war, saying it could hurt the economies of nations worldwide. That's because what opponents say about tariffs really is true.
Tariffs are taxes, and other countries retaliate against them by charging tariffs of their own, thereby creating losers all around. If companies have to pay those taxes, they'll have less to spend expanding their operations and their employment. What's more, they will have to produce their product not where the market says it's cheapest and most efficient, but where those taxes make it cheapest and most efficient.
Still, some entities come out ahead in such trade battles, in the short run at least, while others suffer – unless government does something to mitigate the suffering.
Here's a look at how all this is playing out so far:
The U.S. steel industry wins: Trump slapped a 25 percent tariff on imported steel, and it seems to be having its intended impact on the nation's remaining steel mills. U.S. Steel, for example, says it will add 800 jobs this year. Republic Steel decided to reopen a mill in Lorain, Ohio. Another U.S. steel manufacturer, JSW, plans to spend $500 million to build a new plant and renovate an old one in Ohio.
Tariffs are boosting big steel's bottom line, too. Another American steel producer, Nucor, recently announced its highest second quarter earnings in company history, doubling its returns from a year ago.
In other words, Trump was absolutely right when he tweeted: "Steel is coming back fast."
Bad times for steel users: Predictably, companies that use steel don't like to pay 25 percent more – but some of them have to, because the kind of steel they use is only made overseas. That's the case with Niagara Transformer of Cheektowaga and a host of other companies. What's more, commodities markets are world markets, so tariffs boost steel prices even if companies buy domestic steel.
The result? Plenty of anecdotal evidence that companies that use steel are suffering. A maker of lawn care equipment in Indiana, a nail manufacturer in Missouri and a company that makes beer kegs in Pennsylvania are among those that have announced layoffs. Other companies that use steel are cutting back on their workers' hours and charging customers more as tariffs drive down profits.
Farm country gets a gift: Now you might be thinking: "What a minute – aren't these tariffs supposed to hurt farmers?" And the answer is yes – but that was before Trump decided to lavish $12 billion on them. Those subsidies will go to farmers who are set to lose their Chinese and Mexican customers due to the tariffs those nations levied to retaliate against Trump's steel and aluminum tariffs.
Many soybean farmers and some others haven't lost their customers yet, thought, and it's all because they sell their product on long-term contracts that locked in their prices before the tariffs hit. That being the case, Trump's farm bailout looks less like a rescue than an election-year gift to farm country that only delays the pain the tariffs will bring to the nation's farmers.
Trouble for multinationals: Iconic American companies such as Harley-Davidson and Alcoa suffer amid the trade war because they ceased to be purely American companies long ago. Harley sells plenty of motorcycles overseas, and when the European Union retaliated against Trump's steel and aluminum tariffs by slapping a tax on U.S. motorcycles, Harley decided to move some production overseas. Meantime, Alcoa, the largest U.S. aluminum manufacturer, is lowering its profit projections because it makes plenty of product in Canada – and now that product faces a 15 percent tariff when shipped to the U.S.
With those sorts of things happening, the U.S. Chamber of Commerce said the trade war could eventually threaten millions of jobs while boosting prices for consumers. What's more, the Chamber said it would cost the government $39 billion in total to bail out every American company suffering in the trade war.
Some wins for President Trump: President Trump's supporters will look at all of the above and say something like: "Just wait. Trump is just playing hardball on trade – and winning."
In fact, Trump did chalk up a big win last week. He struck a deal with the EU in which European nations agreed to ease their auto tariffs and to increase imports of soybeans and other U.S. farm products. In return, Trump agreed not to impose tariffs on foreign autos and auto parts, a move that could have boosted auto prices and hurt facilities that make auto parts, such as the Sumitomo North America facility in the Town of Tonawanda.
That EU trade deal could be just the beginning. With the administration negotiating a new North American Free Trade Agreement and pressing China for trade concessions, it's certainly possible that Trump will come out of this trade war with more of the kind of "great deals" he loves.
And even if he doesn't, chances are that Trump sees another one of his tariffs – the one on Canadian newsprint – as a win. After all, that tariff is choking the American newspaper industry. And we all know how Trump feels about the free press.
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