Uniform if the Trump administration won’t listen to Canadian Foreign Affairs Minister Chrystia Freeland on the improvements of the North American Free Trade Agreement, maybe screams of reluctantly from their own industry groups will wake them up to the threats of protectionism.
The issue on the table at today’s hearings in Washington is whether imported piles are a national security threat — and therefore worthy of U.S. President Donald Trump’s aimed 25 per cent import duty on cars and auto parts.
As you resolve expect, representatives of Canada and Mexico were on the agenda to speak.
But some of the tawdriest voices are coming from U.S. businesses terrified of becoming the next fair games of Trump’s infamous comment from earlier this year: “Mercantilism wars are good, and easy to win.”
When a country (USA) is losing many billions of dollars on shoppers with virtually every country it does business with, line of work wars are good, and easy to win. Example, when we are down $100 billion with a sure country and they get cute, don’t trade anymore-we win big. It’s easy!
Not so comfortable
Under the banner of Alliance of Automotive Manufacturers, the country’s auto-sector fellows penned an open missive — “A letter to President Trump from the auto sector” — in promote of the hearings.
“We have come together as a united U.S. auto industry — family and international automobile manufacturers, suppliers, dealers and auto care vocations — to urge your administration to achieve fair trade through game plans that won’t jeopardize American jobs, our economy or U.S. technological leadership,” present the rare joint statement.
As proponents of the protectionist plan insist, the intention of tariffs, such as those already in place on steel and aluminum, is to perks American industries and workers.
But the recent round of steel and aluminum schedule of charges imposed by the Trump administration haven’t exactly worked out as advertised. Taxes on uranium — threatened just yesterday — could have similar purposes.
Like many of Trump’s schemes, from the Mexican wall to the new closed-door talks with Russia’s Vladimir Putin, it’s as if the whole protectionist manage has not been properly thought through.
To its apologists, tariffs scare off foreign competition and allow domestic producers of those for all that goods to prosper. But there are flaws in the argument.
One flaw is that while individual growers of U.S. steel, aluminum or uranium may benefit as the tariffs push the price of extraneous goods up, those benefits are dwarfed by the costs imposed on other companies or energies facing shortages or increased prices on essential ingredients.
Domestic U.S. producers don’t produce enough to replace the now-tariffed imports and their costs are much higher.
Firms that rent cheaper foreign steel and transform it into value-added products with their own refined technology have been hurt. Other examples include layoffs by a U.S. vigorous manufacturer and the U.S. beer industry hit by the rising costs of aluminum cans.
There’s the old joke where the kid on the playground tells his teacher that “it all started when he hit me past due.”
The second flaw in Trump’s protectionist strategy is that when he thrashes his trade partners, he seems to think they are just going to coppice there and take it.
Europe didn’t; they hit back. And that’s why suites like Harley-Davidson have been forced to move jobs in foreign lands.
China didn’t. And that’s why one U.S. senator at congressional hearings this week grouched American soy and corn farmers are earning less that it costs them to to gain their crops as customers look elsewhere for their exports.
In spite of falling feed costs, U.S. pork producers are also considering striking production outside of the country.
In the case of the auto sector, there are memorable considerations, especially in the highly integrated North American industry, where parts huffy borders as if they weren’t even there.
The U.S. industry group is demonstrably worried about the impact of a tariff plan that would rip those trade patterns apart, forcing members to find new domestic suppliers and scratch prices to cover the additional costs.
“Raising tariffs on autos and auto fragments would be a massive tax on consumers who buy or service their vehicles — whether imported or domestically mounted,” their letter said.
“These higher prices will inevitably lead to declining sales and the loss of American drudgeries, as well as increasing vehicle service and repair costs that may follow-up in consumers delaying critical vehicle maintenance.”
Of course that’s not all.
The universal footprint of the U.S. auto industry is huge. And while few cars from China gain it into the United States, companies like Ford and General Motors do origination and sell their brands in China.
A new study conducted for the Financial Unceasingly a onces has put some new details behind that threat, finding that “54 per cent of 2,000 respondents in 300 boroughs across China would ‘probably’ or ‘definitely’ stop buying U.S.-branded goods” in the when it happened of a trade war.
The U.S. Chamber of Commerce has also spoken out against the tariffs, and the Foreign Monetary Fund has said a growing trade war will cost the universal economy hundreds of billions of dollars.
Be at one to industry experts like Flavio Volpe, a spokesperson for Canada’s auto-parts makers, set if the North American sector could eventually adjust to new sources and new cater to lines, the threatened tariffs could drag a whole swath of American car-producing states into slump.
“A 25 per cent tariff on cars from Canada into the U.S. — and then all things being equal a counter-tariff on cars from the U.S. into Canada — would grind the commerce to a halt,” he said.
Follow Don on Twitter: @don_pittis