By Lynda Bryant-Work
Trade War casualties pile up …
“As we learned after President Herbert Hoover signed the Smoot-Hawley tariff at the outset of the Great Depression, vibrant international trade is a key component to economic recovery; hindering trade is a recipe for disaster.”
Trump tariff casualties attributable to Donald Trump’s insistence on amping up the trade war he promised his voters, are beginning to surface as the economy bleeds jobs and prices begin rising.
Industries that use steel and lumber are being hit with higher costs effecting the entire nation on some level, from new-home buyers and builders to manufacturers of other goods.
Sixty workers at Mid-Continent Nail in Missouri, America’s largest nail manufacturer, lost their jobs on June 15. The whole company could be out of business by Labor Day.
According to the National Association of Homebuilders, buyers are caught in a squeeze with lumber prices skyrocketing due to tariffs on Canadian lumber, adding up $9,000 for a single-family home. The median price of a new home in April was $312,000, in a market whose inventory is already thin.
Canada has historically been the largest supplier to the U.S. softwood lumber market, accounting for around 28 percent of annual U.S. sales in the past decade.
Homebuilders have increased construction of entry-level homes, but cost pressures related to labor shortages, soaring materials prices and regulation will limit the building of smaller homes, said Oxford Economics.
Most homebuilders quote a price to a customer based on their current expectations for the materials, but when the price for lumber spikes suddenly, builders are forced to absorb those costs and raise the prices for the next customers.
That spike in prices has led many customers to decide not to buy.
The Trump administration argues that U.S. producers have been hurt by subsidies provided to Canadian competitors by that government and the U.S. Lumber Coalition initially supported the administration’s decision to impose lumber penalties pending a new agreement with the Canadian government.
However, 171 lawmakers sent a letter to the Trump administration urging it to reconsider the lumber tariffs, according to The Hill.
“With no agreement and tariffs averaging just over 20 percent in place, lumber prices have skyrocketed, hitting an all-time high this year,” the lawmakers wrote in the letter.
With steel being the next choice used in construction as a replacement, it has its own tariff issues.
Trump’s promise to use import tariffs to revive the U.S. steel and aluminum industry was opposed by economists, labor experts and industries, but the White House moved forward anyway. As a result, more than 146,000 Americans will likely lose their jobs, according to estimates.
While tariffs may protect some steel industry jobs, the real damage will be done in industries that use imported steel, such as automakers, or the nail manufacturing company that is already laying people off.
A little more than 400,000 are employed in the US metal-producing sector, while four and half million work in jobs dependent on metal.
Employers in these other industries will have to pay more materials, making products costlier and less competitive, forcing them to offset the loss by cutting jobs. Add to that, the countries hit by the Trump tariffs will also tax imported U.S. products.
The Trade Partnership estimated that five U.S. jobs will be lost for each one saved by the tariffs. And that estimate assumed the U.S partners in the North Atlantic Free Trade Agreement (NAFTA), Mexico and Canada would be exempted from the tariffs.
The tariffs are already having collateral damage that is causing job losses and will stifle efforts to expand and create jobs. Benchmark steel prices have risen 37 per cent in the US, according to S&P Global Platts. The benchmark US aluminum price is up 12 per cent this year.
History has proven how disastrous steel tariffs are. In 2002, George W. Bush imposed tariffs on steel imports for the same reason as Trump but ended them when the World Trade Organization ruled them illegal. During the 18 months the tariffs were in effect, steel prices spiked, putting 200,000 workers out of their jobs.
The WTO may again rule the recent trade tariffs illegal, but it took 18 months to make that ruling the last time, while U.S. industry, consumers and workers paid the price.
Though the United Steelworkers previously supported the Trump administration’s tariffs, it has backed away, saying in a statement, “In recent days, it has become increasingly difficult to understand the reasoning behind certain decisions and policies. The regular chaos surrounding our flawed trade policies is undermining the ability to project a reasoned course and ensure that we can improve domestic production and employment.”
Across the board, tariffs will hurt American consumers as they face higher costs for cars and trucks, beer and soft drinks, canned goods and many other products.
“Make no mistake, this is a tax on American families,” said Matthew Shay, the President and CEO of the National Retail Federation, a major trade group for the retail industry.
The financial impact on automotive parts and production is not yet known, but is expected to be significant, the Center for Automotive Research said in a report.
“American consumers would buy fewer vehicles if prices were to rise at a rate commensurate with materials cost share and the tariff impact,” the report said.
The aluminum tariff imposed a $347.7 million tax on America’s beverage industry, including brewers and beer importers, and the loss of 20,291 U.S. jobs, the Beer Institute trade group said.
MillerCoors tweeted the company is selling a higher amount of its beers in aluminum cans and said the promised tariffs would cause aluminum prices to rise and “likely lead to job losses across the beer industry.”
“We buy as much domestic can sheet aluminum as is available, however, there simply isn’t enough supply to satisfy the demands of American beverage makers like us,” the company also tweeted. “American workers and American consumers will suffer as a result of this misguided tariff.”
Luis Felipe Pedreira Dutra, chief financial and technical officer of Anheuser-Busch InBev, told financial analysts that roughly 2 million jobs depend on the U.S. beer industry.
In a letter to Trump, the Can Manufacturers Institute said tinplate steel constitutes roughly 60 percent of a can’s cost and estimated that a tariff as low as 5 percent would trigger approximately $1 billion in annual costs.
“Given the industry’s thin margins, manufacturers cannot absorb this cost and will be forced to pass it on to consumers,” CMI officials wrote. “A tariff on imported tinplate steel would stifle growth and could mean the loss of manufacturing jobs for thousands of American workers and their families,” the letter added.
As trade talks fail and the situation becomes more ominous with other trade partners threatening retaliation, industry and consumers stand braced for the negative impact, counting the pennies they received from the tax cuts in hopes it will offset the new “tax” on Americans created by tariffs.