In what is bound to be the least surprising headline of the year, it would seem that the tariff war between the United States and her trading partners is not going as swimmingly as was initially promised.
Indeed, the tariffs have become a major drag on an economy trying to take off if not for ridiculous Washington policies. One estimate shows that if the over $200 billion in tariffs levied against China, Canada, Mexico, and the EU had never happened, economic growth in the third quarter would’ve hit 5.3 percent instead of 3.5 percent.
While 3.5 percent GDP growth is certainly better than much of the anemic economic numbers of the Obama Administration, the contrast is startling and should be a wakeup call to the smart set operating in the West Wing’s policy shop.
Opportunities for future workers are being lost because the President has engaged in an archaic protectionist tax war with no endgame in sight. The losers from this ill-conceived gambit will not be the communist regime in China or our neighbors to the north and south.
The losers will be the American people.
General Motors announced this week that it will be cutting 8 percent of its work force resulting in the loss of over 14,000 jobs. This is in no small part due to a $1 billion hit the company had to absorb from increased steel prices driven wholly by the Administration’s own tariffs.
Steel prices have increased 10 percent in the past eight months. And the combination of domestic and foreign tariffs on the price of steel have effectively raised the cost of consuming steel products by 25 percent. The impact has been so broadly felt that there have been over 21,000 requests from U.S. companies for exemptions from steel tariffs.
The next sector likely to suffer significant job losses and diminished economic gain is the agriculture sector. And for America’s farmers, it’s coming from both the legislative and executive branch.
Congress is wrapping up a nearly $1 trillion food and farm welfare bill that will lock in price support programs that trigger exorbitant taxpayer subsidies when commodity prices fall below their centrally-planned targeted price markers. This means if the price of corn or rice or soybeans fall below their benchmark, taxpayers shell out payments to farmers to “offset” their lost revenue.
Aside from being the poster child of Washington-mandated cronyism, these ag subsidies—known as shallow loss programs—are targeted at specific commodities under Title I of the farm bill. Some analyses have shown that the vast majority of these taxpayer-funded subsidies go to large agri-corporations as opposed to small family-owned farms.
Congress’ binge appetite for propping up the entire agriculture industry with taxpayer money, price supports, and controls on supply and demand has eroded the farming industry to a point where it’s becoming more and more difficult for smaller farms to compete and less desirable for young people to want to enter the industry at all.
Lawmakers have been stuck on a final conference report for the food and farm welfare bill for months. The hang up, of course, is over federal forestry programs and the extent to which Republican negotiators want ‘active management’ to clear lands to prevent forest fires and Democrats oppose ‘active management’ out of fear of environmental harm.
And now, with the Administration’s tariff scheme becoming little more than a parody of a toddler driving his tricycle into a wall and then wailing about it, the U.S. agriculture industry is expected to suffer as export markets close, crops sit in storage, job losses mount, and consumer costs increase.
And yet, as evidence continues to grow that a trade war aimed at our largest trading partners isn’t working, especially in the shadow of our ever-increasing $21 trillion national debt (one-third of which is held by some of the very nations we’re in a trade war with), the Administration’s response has been to obfuscate and cast blame on the very industries being hurt by their policies.
The pain is only going to escalate until an adult steps into the room and decides to embrace free markets and truly free trade.
Until that happens, the bad news is only going to escalate. And those of us paying the price (literally) in higher fuel, home, food, and household good prices will be left wondering if anyone in Washington even knows what they’re doing any more.
