Trade is a big issue that drives a wedge between President Donald Trump and the traditional pro-business wing of the Republican Party, and so mainstream Republicans were hardly surprised but mighty exasperated recently when the president announced major tariffs on steel and aluminum products coming into the United States.
The Trump administration will place a 25-percent tariff on steel imports and a 10-percent tariff on aluminum imports for an unspecified time, if he follows through with the announcement.
In a later tweet, Trump said the tariffs would remain in place until Mexico and Canada signed what the president called a fair renegotiation of the North American Free Trade Agreement, or NAFTA, a trade deal Trump says has been an economic disaster for the U.S.
"We have large trade deficits with Mexico and Canada," Trump tweeted this week. "NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must....treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying."
Reaction was immediate. Leaders of the European Union told Reuters they might slap tariffs on American goods such as bourbon and Harley Davidson motorcycles. Harley Davidson is headquartered in Milwaukee.
But, in another tweet, Trump immediately said he would counter their counter tariff:
"If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!"
All this sparked fears of a trade war, though by the first of this week the stock market wasn't suffering. Still, the announcement split the business community, and it drew expected sharp rebukes from many Republicans, including leading Republicans in Wisconsin.
Gov. Scott Walker wanted the president to reverse course.
"If the president wants to protect good-paying, family-supporting jobs in America, especially here in Wisconsin, then he should reconsider the administration's position on these tariffs, particularly on ultra-thin aluminum," Walker said. "As I described to U.S. Secretary of Commerce Wilbur Ross last year, there is not a market in America that can support the demand for ultra-thin aluminum for employers here in Wisconsin and across the country."
Ironically, Walker said, American companies who will feel the negative impact of the tariffs can actually move their operations to another country, such as Canada, and not face new tariffs on the sale of their products.
"This scenario would lead to the exact opposite outcome of the administration's stated objective, which is to protect American jobs," he said. "With this in mind, I respectfully ask the president and his administration to reconsider their position on these tariffs."
Republican Wisconsin U.S. Sen. Ron Johnson was equally worried.
"The president's announcement that he plans to levy higher taxes on materials that Wisconsin's manufacturers and consumers purchase is concerning," he said. "I plan to work with my colleagues and the administration to ensure fair, robust trade policies that protect our state's workers and consumers."
The National Retail Federation, the nation's largest retail trade association, went even further, calling the tariff's not merely a tax on materials but on American consumers.
"Make no mistake, this is a tax on American families," said president and CEO Matthew Shay. "When costs of raw materials like steel and aluminum are artificially driven up, all Americans ultimately foot the bill in the form of higher prices for everything from canned goods to electronics and automobiles."
Shay said the country would gain nothing from such a one-sided policy.
"These tariffs threaten to destroy more U.S. jobs than they will create while sending an alarming signal to our trading partners and diminishing markets for American-made products overseas," he said.
In Congress, House speaker and Wisconsin Rep. Paul Ryan broke with Trump on the tariffs, and so did House Ways and Means Committee chairman Kevin Brady (R-Texas), who just wrapped up a bipartisan visit to Mexico City for NAFTA negotiations.
Brady said progress was being made on a new NAFTA deal, and he said Canada and Mexico should not be included in the tariffs.
"Mexico and especially Canada are big customers of American-made steel," Brady said. "I applaud the president for targeting unfairly traded steel and aluminum but unlike the tariffs that also sweep up fairly traded steel and aluminum, especially with trading partners like Canada and Mexico, they should be excluded from this tariff."
Brady said it was important that there be a quick and timely exclusion process for existing contracts as well as for individual businesses that can show that they're being fairly traded.
On the other side
While Trump was running into Republican turbulence, he was gaining support among some liberal and populist Democrats, labor, and, of course, the aluminum and steel industries.
U.S. Sen. Bob Casey (D-Pennsylvania) commended Trump for announcing his intent to protect steelworkers from countries, like China, that he said cheat on trade.
"I have repeatedly called on this and previous administrations to aggressively enforce our trade laws," Casey said. "For years, foreign countries have been dumping steel into our markets and costing our workers their jobs and suppressing their wages."
While it had taken Trump far too long to take the action he did, Casey said, it was nonetheless a welcome step.
"When countries cheat on trade, Pennsylvania workers lose," he said. "I urge the administration to follow through and to take aggressive measures to ensure our workers can compete on a level playing field. When the playing field is level, Pennsylvania workers will outcompete any in the world."
AFL-CIO president Richard Trumka also praised Trump's move.
"For years, we have called attention to the predatory practices of some steel exporting countries," Trumka said. "Such practices hurt working people and cheat companies that produce in the U.S. We applaud the administration's efforts today to fix this problem."
Trumka said effective enforcement of trade laws was critical to leveling the playing field and ensuring that U.S. steel producers and their employees have a fair shot in the global economy.
"Secretary Ross, ambassador (Robert) Lighthizer, and director (of the White House National Trade Council Peter) Navarro have rightly advocated for these actions despite opposition from the Wall Street wing of the administration," he said. "This is a great first step toward addressing trade cheating, and we will continue to work with the administration on rewriting trade rules to benefit working people."
David Burritt, president and CEO of US Steel, said the president's move was the latest in a series of political and policy triumphs.
"This is vital to the interests of the United States," Burritt said. "This is our moment, and it's really important that we get this right. We believe that the leadership that this administration has shown on tax reform is simply outstanding. The elimination of bureaucracy is simply outstanding. We trust your judgment on this issue."
Burritt said he was a supporter of global views and free trade, but he said he also knows when something is unfair.
"We are not protectionists," he said. "We want a level playing field. It's for our employees, to support our customers. And when we get this right, it will be great for the United States of America. We have to get this done."
Conservative columnist Pat Buchanan said previous generations of Republicans had embraced tariffs, and the policies had produced unprecedented American prosperity.
"From Lincoln to William McKinley to Theodore Roosevelt, and from Warren Harding through Calvin Coolidge, the Republican Party erected the most awesome manufacturing machine the world had ever seen," Buchanan wrote this past week. "And, as the party of high tariffs through those seven decades, the GOP was rewarded by becoming America's Party."
That is to say, Buchanan continued, 13 Republican presidents served from 1860 to 1930, and only two Democrats, and Grover Cleveland and Woodrow Wilson were elected only because the Republicans had split.
Why, then, a terror of tariffs in the GOP? Buchanan wondered.
"The U.S. relied on tariffs to convert from an agricultural economy in 1800 to the mightiest manufacturing power on earth by 1900," he wrote. "Bismarck's Germany, born in 1871, followed the U.S. example, and swept past free trade Britain before World War I."
Since George Bush the elder was elected, Buchanan wrote, the U.S. has run $12 trillion in trade deficits, and, in the first decade in this century, the nation lost 55,000 factories and 6-million manufacturing jobs.
Buchanan said the idea was to shift taxes off goods produced in the USA, and impose taxes on goods imported into the USA.
"As we import nearly $2.5 trillion in goods, a tariff on imported goods, rising gradually to 20 percent, would initially produce $500 billion in revenue," he wrote. "All that tariff revenue could be used to eliminate and replace all taxes on production inside the USA."
Not a tin ear
Trump used a listening session with executives from the steel and aluminum industry to make his bombshell announcement.
At the session, the president said the aluminum and steel industries used to be a lot bigger, and he promised they would be a lot bigger again. He said the industries had been unfairly treated by bad policy, by bad trade deals, and by other countries.
"They've been horribly treated by other countries, and they have not been properly represented," Trump said. "More importantly, because of that, workers in our country have not been properly represented. So we're going to build our steel industry back and we're going to build our aluminum industry back."
Trump said people had no idea how badly the U.S. has been treated by other countries and by people representing the U.S. who didn't have a clue.
"Or if they did, then they should be ashamed of themselves because they've destroyed the steel industry, they've destroyed the aluminum industry, and other industries, frankly, when you look at all the plants, the car plants, automobile plants that moved down to Mexico for no reason whatsoever, except we didn't know what we were doing," he said.
A couple of months ago, Trump said his administration had slapped a 30-percent tariff on washing machines coming into the country.
"They were dumping the machines all over the place and we had lost our manufacturing abilities for washing machines," he said. "Now we have plants being built; put a 30-percent tariff on. And we have plants being built, and nobody has seen that in many, many years, and it's happening at a rapid pace."
Same thing with solar panels, Trump said.
"We had 32 companies, of which 30 of them were out of business, they were closed," he said. "And the two were on mouth-to-mouth resuscitation. They were finished. They would have closed pretty quickly."
Now, Trump said, the two companies are doing much better and considering opening seven or eight of the old plants that were closed.
"So, a lot of good things could happen," he said. "The fact is, we weren't treated, and we haven't been treated fairly by other countries. But I don't blame the other countries. When I was in China, I said, 'Listen, President Xi' - I have a lot of respect for President Xi. I said, 'I don't blame you.' If you're able to get away with making almost $500 billion a year off of our country, how could I blame you? Somebody agreed to these deals. And those people should be ashamed of themselves, what they've let happen."
To bring industries back fairly quickly, Trump said an immediate 25-percent tariff on steel and the 10-percent tariff on aluminum was needed.
"We're in a situation where competing unfairly has meant that there's been capital depletion in our business, a lack of investment," he said. "And that lack of investment is reflected in a loss of jobs in America. And it's all been a matter of unfair competition."
Trump said a level playing field was needed to avoid losing more manufacturing infrastructure. He said having a vibrant, capable manufacturing sector was also a national security issue.
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