This article originally appeared in the Morning Consult on June 20, 2018.
In the wake of historic tax reform delivered by President Donald Trump and Congress, the American economy is showing strong signs of life. Just days ago, it was reported that the United States added around 223,000 net new jobs in May, helping the economy reach an 18-year low jobless rate of just 3.8 percent. And with new tax reform in hand, taxpayers can expect to keep more of their hard-earned dollars in their pockets.
Those strong signals of economic health are part of what make the administration’s recent moves toward imposing new tariffs so confusing. According to reports, the president is now considering using Section 232 of a 1960s trade law, the same instrument he used to levy tariffs on imported steel and aluminum earlier this year, to create a new tariff as high as 25 percent on auto imports. While the president’s tariffs on steel and aluminum were certainly unpopular, this latest unsolicited proposal has been met with widespread criticism not only for its potential economic consequences here at home, but for the seeds of discord it sows with major trading partners such as Japan, South Korea and Germany.
It doesn’t make sense that Trump would risk dealing a major blow to the American economy with new tariffs when pro-growth policies are just now starting to generate real results.
Consider the serious consequences of the administration’s pursuit of tariffs. First, all tariffs are essentially taxes paid by consumers. In the case of steel and aluminum, the effect of tariffs is to raise the price of products made in the United States, affecting not just the obvious sectors such as construction, but raising the cost of everyday products such as washing machines, dryers and ovens. Jobs matter too. More than 7 million jobs in the United States are tied to the auto industry, which in turn is tied to the price of steel. Another 2 million jobs are supported by beer manufacturing, which is heavily influenced by aluminum prices,
According to the Peterson Institute for International Economics, these tariffs would affect more than $200 billion in U.S. imports, dropping American vehicle production by 1.5 percent and costing 195,000 jobs in the United States. Further, if competitor nations countered with their own tariffs, the drop in production could be a full 4 percent, costing 624,000 American workers their jobs.