Carroll County Times

Zirpoli: Trump's tariff and trade war is failing

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Ford Motor Company recently reported a $1 billion drop in profits directly related to tariffs enacted by President Donald Trump. In response, they announced major layoffs of around 12 percent of their workforce. Ford CEO Jim Hackett, in an interview with Bloomberg News, stated that Trump’s tariffs on imported aluminum and steel alone were largely responsible for the decline.

Ford is not the only car company hurting because of Trump’s tariffs. Paul Eisenstein at the Detroit Bureau of Reuters writes that 276,000 vehicles made in the United States were shipped to China in 2018. But the trade war between the U.S. and China has impacted these sales. After Trump announced tariffs against Chinese goods, Eisenstein noted that “Customs agents in Shanghai have refused to release a shipment of American-made Mercedes-Benz SUVs because of what they have described as a ‘safety risk.’” Joe Phillippi, a Wall Street automotive analyst, stated: “This, unfortunately, appears to be part of a tit-for-tat in an escalating trade war, and it could reach crazy levels.”


As noted by Eisenstein, the tariff war with China is hurting “the industrial heartland” of America the most, where these vehicles are made. For example, says Eisenstein, because of the tariffs, Ford has had to add thousands of dollars to the base price of a Ford Mustang. American consumers are paying for Trump’s tariffs, not China. Mary Papenfuss, writing for Huffington Post, found that “President Donald Trump’s trade war cost American businesses and consumers $3 billion a month last year in higher prices” citing a study by the Federal Reserve Bank in New York in partnership with Princeton and Columbia Universities. Trump once said that “trade wars are good and easy to win.” But American car manufacturers and farmers are having a difficult time finding anything good in Trump’s trade policies.

BMW is the largest exporter of vehicles to China and the new tariffs have hurt them the most. BMW has its largest plant in Spartanburg, South Carolina. Before the new tariffs, BMW announced a $1 billion expansion of the plant creating 1,100 new jobs. But the tariffs have put all of that growth and hiring into question.


Farmers have been hit especially hard. In an interview with PBS News, Iowa farmer Howard Hill said that his 7,000 pigs are selling for less than it cost to raise them. Retaliatory tariffs on American farm exports have contributed to a 12 percent drop in net farm income in 2018, according to the PBS report.

It seems that Trump is confused about how tariffs work when he says things like: “China is paying the U.S. billions of dollars in tariffs” or, as he tweeted on Feb. 16, “Billions of dollars are being paid to the United States by China in the form of Trade Tariffs.” Has anyone explained to the president that his tariffs on imported goods are paid for by American companies who pass the cost on to American consumers?

Worst of all, the tariffs have failed to achieve Trump’s major objective: lower the trade deficit with China and other nations. According to the U.S. Commerce Department and reported by Jim Tankersley and Ana Swanson of The New York Times last week, “America’s trade deficit in goods with the rest of the world rose to its highest level in history” to $891 billion in 2018. This included a record $419 billion deficit with China, $169 billion with the European Union, $82 billion deficit with Mexico and $20 billion with Canada.

Tankersley and Swanson called the growing trade deficits “a case of textbook economics catching up with some of Mr. Trump’s unorthodox economic policies.” For example, they reported, “Stiff tariffs on Chinese goods help slow China’s economy, crimping American exports, which declined nearly 50 percent in December from the same month a year ago.” Fewer exports to China, a major buyer of American goods, especially farmers who sell food to China, is bad business for American businesses and farmers. Trump’s efforts to hurt China’s economy have backfired on American businesses and farmers.

While Trump has convinced many Americans that trade deficits with other nations are bad for our economy, others have tried to explain to him that these trade deficits reflect the fact that Americans have more money and purchasing power than poorer nations. Richer nations, like the United States, tend to buy more and import more. It means that we have a stronger economy. Poorer countries tend to buy less and import less. Trump does not seem to understand this basic economic reality. Worse, he does not seem to understand how his tariffs have disrupted the supply lines and increased costs for the American automobile industry while decreasing exports for many American businesses and farmers.