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Saving jobs with tariffs is not cheap

Saving jobs with tariffs is not cheap

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President Donald Trump on National Agriculture Day in March issued a proclamation supporting the nation’s farmers.

It read: “America’s strong agricultural sector is a key component of our Nation’s robust economy and trade. Every $1 of United States agricultural and food exports creates another $1.27 in business activity. Our country’s agriculture exports are valued at more than $100 billion, and every $1 billion in exports supports approximately 8,000 American jobs. Moreover, agriculture contributes to at least 8.6 percent of our gross domestic product. The economic boost from our agriculture reaches beyond the fields our farmers tend, with unrivaled skill and diligence, to communities all across America.”

Farmers find themselves wondering if the president’s words are just that, words.

Now that Trump has followed through on a pledge to implement tariffs on foreign steel and aluminum imports, the expected international reaction has occurred. China has responded with plans for tariffs on U.S. agriculture imports.

The potential impact is not small. U.S. farmers are major exporters, shipping nearly $20 billion in goods to China in 2017. The American pork industry alone sent $1.1 billion in products to China, making it the No. 3 market for U.S. pork. Soybeans are other commodities are also significant exports.

Trump contends he is making good on a pledge to stop unfair trade practices that have hurt industries such as domestic steel and aluminum. But in attempting to help one sector of the economy, Trump risks doing damage to others.

It’s the nature of the beast when it comes to tariffs.

Writing for, Burton Abrams, a professor of economics at the University of Delaware and a research fellow at the Independent Institute, cites recent history in predicting how the Trump tariffs are likely to unfold.

In 2002, President George W. Bush imposed a steel tariff between 8 percent and 30 percent. It was intended to last until 2005.

International condemnation was swift. The European Union imposed retaliatory tariffs. The World Trade Organization found the U.S. tariffs in violation of signed agreements, and a multibillion-dollar penalty was threatened if the tariffs were not eliminated.

Even without the international uproar, the steel tariffs were a net loser for the economy, Abrams states. While the steel industry and its workers were winners, greater losses were spread widely throughout the economy. Many U.S. manufacturers using steel now had higher costs and job losses. Producers like Boeing and Ford found themselves less competitive against Airbus and Toyota.

Abrams explains further how the tariffs backfired, citing domestic manufacturers of 55-gallon steel drums.

Before the Bush tariffs, they were doing a good business. After the tariffs, imports of foreign-produced barrels surged. U.S. barrel manufacturers filed for and received an exemption on the steel they imported. Reportedly, hundreds of other exemptions were granted to manufacturers citing hardships.

“It was clear the tariff plan was imploding. President Bush, facing pressure domestically and abroad, finally relented and removed the steel tariffs in December 2003.”

Abrams predicts the Trump tariffs will repeat the misadventure.

And if a study from the 2002 Annual Report of the Federal Reserve Bank of Dallas proves correct, overall impact will be costly – and beyond just for agriculture. The study estimated the cost to consumers of saving jobs in tariff- and quota-protected industries is $231,000 annually per job saved.

As Abrams states: “Saving jobs with tariffs does not come cheap.”


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