Search
Tuesday 11 December 2018
  • :
  • :

A Breakdown on Tariffs and Trade

While the new U.S.-Mexico-Canada Agreement (USMCA), formerly known as NAFTA, addresses a variety of trade issues, one thing that’s still left unattended are the U.S. tariffs on steel and aluminum. Here, David Taylor, president and chief executive officer of the Pennsylvania Manufacturers’ Association (PMA), shares his expertise and his insights on the Trump administration’s recent trade policies and the impact on employers in 2019.

The PMA is a statewide trade organization that represents the manufacturing sector in Pennsylvania’s public policy process. Please provide a snapshot of your membership base and your organization’s mission.

PMA’s mission is competitiveness. We want to make it the smart business decision for people to choose to locate, expand, invest and hire in Pennsylvania rather than one of our competitor states. To that end, we work to advance a pro-growth agenda in Harrisburg to attack the baseline cost of creating and keeping jobs in the Commonwealth. In particular, we are focused on restraining state government spending, enacting pro-growth business tax relief, reforming the regulatory burden, limiting lawsuit abuse and building the workforce. While we represent the entire manufacturing sector, our flagship members are Pennsylvania’s largest and most notable manufacturers, including U.S. Steel, Merck, Boeing, PPG Industries and The Hershey Company.

You are presently in your 22nd year with the PMA and a highly sought-after guest and commentator on policy issues. In your expertise, how important is the discussion on steel and aluminum tariffs right now and in the coming year?

The discussion on steel and aluminum tariffs is exceptionally important and will remain so, because this issue represents the larger debate on the role of our federal government in defending American employers and employees in international trade. Please understand that PMA is pro-trade and that we agree that American manufacturers must bear the full challenge of competing and earning customers in the global marketplace. At the same time, we believe that markets should be governed by profit and loss. When the governments of our foreign competitors — especially non-market economies like China — subsidize their domestic producers, distort the global marketplace, and otherwise subvert the market function, our government has a responsibility to step in and defend America’s economic interests. Industrial metals will be the arena where that larger battle will be won or lost in America’s domestic policy debate.

In May, the White House announced tariffs of 25 percent on steel imports and 10 percent on aluminum from the European Union, Canada and Mexico. The goal was to make foreign imports more expensive, and thus more comparative in cost to American-made steel, driving more domestic demand back to U.S. producers. In your opinion, are the tariffs working? Has the president gone far enough on his promise to help out the steel industry?

The early signs for American steelmakers seem positive, but it will take time to sort things through. Again, Americans should insist on market-based competition with friendly nations whose economies conform to profit/loss market principles. Chinese steel is heavily subsidized by the dictatorship in Beijing, whether through free land, free energy, bank loans that never need to be repaid, etc. Overproduction of raw steel by China — the amount produced beyond the ability of the nation’s economy to consume it in a year — is greater than total steel production in the United States. Furthermore, that subsidized raw steel is then used as inputs in other countries and/or disguised by transshipment through third countries to evade nation-of-origin reporting. This is a global challenge, which is why it requires a globally-applied American response. The Trump administration must maintain its resolve and see this challenge through to a satisfactory conclusion, no matter how long it takes.

When it comes to these tariffs, who do you believe are the real winners and losers, particularly manufacturers here in Pennsylvania?

For steel and aluminum consumers, there will be shocks to their supply chains and increases in the costs of their inputs. While no one likes to see higher prices, these costs are only rising to the actual non-subsidized market costs of these commodities. If we believe in free enterprise, we must insist that markets be governed by profit and loss. The artificially low prices for consumers have come at the cost of jobs and earnings for producers. Because industrial metals are foundational to the rest of our manufacturing economy, the United States must not allow these critical industries to be stripped away by the subsidized industrial policies of foreign governments.

Despite the new USMCA, the president said key U.S. trade partners would still not be exempted from U.S. steel and aluminum tariffs. Do you see this changing any time soon and why?

I certainly hope so. Alienating our allies— especially Canada, our close ally and largest trading partner — is a major blunder that undermines our ability to confront bad actors like the dictatorship in Beijing. Canada has not been part of the practices we seek to end, and, considering the high degree of integration between the Canadian and U.S. economies, Canada should never have been treated this way.

Is there anything you would like to add?
Manufacturing is the engine that drives Pennsylvania’s economy, adding $86 billion in value every year, employing over a half-million Pennsylvanians on the plant floor, and sustaining millions of additional Pennsylvania jobs in supply chains, distribution networks and vendors of industrial services.