September 18, 2018 | ° F

O'BRIEN: Trump's tariffs will hurt American workers


Opinions Column: Policy Over Politics


President Donald J. Trump last week announced steep new tariffs on steel and aluminum imports from around the world, yet another step toward economic protectionism and away from free trade. With more general remarks in favor of reducing the country’s trade deficit, he signaled tariffs on more goods may be on the way. 

The move was sold by the administration as a way to revive the Rust Belt, where manufacturing employment has been on a steady decline for decades. While most of the industrial job losses have actually come from automation and increased productivity, particularly in steel, some of it has also been due to increasing competition from developing countries. By raising the price of foreign steel and aluminum, the administration argues, domestic companies will be incentivized to buy from American firms rather than foreign competitors.

While the administration is right that American companies producing steel and aluminum will be helped by these new measures, it ignores the broader effects the tariffs will have on the economy, which are conclusively negative. American companies that require steel or aluminum for their production processes — think cars, construction, shipping, household appliances and countless other sectors — will see their input costs go up. They will produce less, pay their workers less and charge more for the same products. 

The nostalgia for a manufacturing-based economy is misguided and will hurt American workers in the long run. The loss of manufacturing jobs is natural for a developed economy like that of the United States. All of our peer countries have undergone the same transformation, shifting from industrial economies to post-industrial service-based economies. It is not like we are manufacturing less, either. The value of manufactured goods in the United States has been steadily rising for decades, even as employment has shrunk. This means that American companies have come up with innovative technologies and production processes that simply require fewer workers. 

None of this hysteria over economic change is new. In the 19th century, farmers developed new machinery and processes that allowed them to produce more with far fewer hands. Did this evolution result in mass unemployment and widespread hardship? Of course not. Workers migrated to northern cities to take new jobs in manufacturing, just as today’s workers are shifting to a diverse array of new service industries. While natural changes like these in the composition of the economy certainly cause anxiety and uncertainty for displaced workers, they have also made modern America and the modern world as a whole more prosperous, healthy and peaceful than at any other point in human history.  

Trump is right to have some concerns about the negative side effects of free trade. Increased competition has played a role in the economic distress of the Midwest, and there are certainly countries who try to skirt the global rules of trade by artificially depreciating their currencies or setting up hidden trade barriers. But applying massive tariffs is not the solution to any of these problems, and only makes Americans poorer. In addition, it could ignite a global trade war of escalating tariffs that will hurt everyone involved. In 1930, attempting to ease a deep economic crisis, former President Herbert Hoover and Congress passed the Smoot-Hawley Tariff Act, a massive array of trade barriers that they thought would spur domestic production. Instead, it only deepened and lengthened the Great Depression. Not only did the barriers raise costs for American businesses, but it also caused other countries to raise their own tariffs, making everyone worse-off. 

If the issue truly is stagnation in the Rust Belt, that are far more cost-effective ways to address that, such as increased investments in human capital and infrastructure or land use reform to revive geographic mobility. If, as Trump asserts, countries are cheating the global rules of trade, there are established processes by which our government can make trade partners play by the rules. None of the problems caused by trade require a broad distortive tax on American businesses and consumers. Moreover, free trade has proven to be the greatest antipoverty mechanism ever created, so while it’s fair to be concerned about trade’s side effects at home, we must not forget the billions of people who have been lifted from unfathomable destitution because of trade. 

The modern era of global trade and cooperation has proven to be immensely fruitful for every country involved, even with its warts. Neither last week’s tariffs nor any of the various other anti-trade moves Trump has made threaten this order, but it is troubling to see a president so fundamentally at odds with long-settled economic theory. If the president truly wants to look out for American workers, he should embrace the winds of economic change and allow American businesses to seek out the best deals around the world.

Connor O'Brien is a School of Arts and Sciences junior majoring in economics. His column, "Policy Over Politics," runs on alternate Thursdays. 

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Connor O'Brien

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