V-Shaped Economic Recovery Requires Freer Trade, Not Tariffs

By Stephen Moore

August 18, 2020 6 min read

It seems obvious that President Donald Trump is going to need a blockbuster economic revival if he hopes to win reelection in November.

Part of the equation to achieve that spring back is to resist trade protectionist temptations. But will he?

While everyone likes the sentiment of bringing manufacturing jobs back to America, trade barriers have never been very effective. What has been effective for Trump, as more than 1 million blue-collar jobs have come back to these shores, has been a competitiveness brought on by cutting taxes, slashing regulations and so on.

But protectionism against our friendly trading partners has started to rear its ugly head.

Here are three stark examples. First, steel and aluminum tariffs keep rising, and these have added to the costs of everything from beer to cars to building a new home. The cost of these tariffs, mostly against Canada, have been estimated by the Peterson Institute to cost consumers of $900,000 — multiple times the salaries of the workers. Now beer and soft drink producers are claiming a shortage of cans, which will drive up prices at the grocery store.

Another emerging multibillion-dollar trade brawl involves mattresses and whether to allow their importation. Led by Leggett & Platt, Corsicana Mattress Co. and Elite Comfort Solutions, domestic companies are trying to manipulate U.S. trade laws and unfairly protect a dominant market share. It's a case study in corporate welfare under the guise of "protecting jobs."

On March 31, this cadre of manufacturers filed multiple petitions alleging that the importation of mattresses from strong U.S. allies and trading partners in Southeast Asia is causing material injury to the domestic mattress industry. It's a baseless claim, not to mention one laced with irony, as many of the petitioners, such as Tempur-Sealy, have expanded and watched their sales soar by nearly 20% in the current conditions.

If these companies succeed in securing the trade barriers, mattress distributors and retailers that import materials from partner countries such as Thailand, Malaysia and Vietnam would see oppressive tariffs placed on their goods. This will eliminate thousands of domestic jobs, shrink margins for retailers and significantly raise prices for consumers.

A recent survey published in CivicScience found "71% of Americans indicated they are at least somewhat concerned about the impact of recent trade policies and tariffs on their household expenses in the month of April."

The mattress manufacturers have tried this ruse before. Many of these mattress manufacturers have paid hundreds of millions of dollars in heavy fines for attempts at price fixing and violating antitrust laws in the past.

The U.S. Department of Justice recently raised the issue of higher costs and asked trade officials to "take the competitive effects of the ongoing pandemic and its likely aftermath — including potential effects on mattress prices for hospitals and other consumers and whether domestic supply can meet current demand — into account when assessing the extent to which domestic industry may be harmed by the conduct alleged in this case."

Finally, there is the case of phosphate fertilizers. Mosaic Co., a domestic supplier, is requesting taxes on imported phosphate fertilizer of 71.5% for imports from Morocco and 31% for imports from Russia in response to alleged foreign subsidies.

The American Farm Bureau Federation warns, "If these duties are imposed, production costs to farmers across the country for corn, soybeans, cotton, wheat and other crops will increase for the next planting season." The Agricultural Retailers Association adds, "Granting this petition will very likely limit fertilizer supply options for America's farmers and ranchers and increase their input costs."

In each of these cases, consumers and some domestic producers get shafted and pay the price — when Americans are already squeezed financially. This all comes at a time when China should be the target, given Beijing's rising threat to our economic and national security.

Even Trump conceded that "this is not the moment to engage in new trade fights with allies" in a recent interview with The Wall Street Journal.

In this time of hopefully swift economic recovery, the Trump administration would be wise to resist special-interest trade protection rackets and concentrate on rebuilding American jobs through tax cuts and deregulation — which worked before and will work again.

Stephen Moore is a senior fellow at the Heritage Foundation and an economic consultant with FreedomWorks. He is the co-author of "Trumponomics: Inside the America First Plan to Revive the American Economy." To find out more about Stephen Moore and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

Photo credit: MichaelGaida at Pixabay

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