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Trade War

Editor’s note: After President Trump announced he intended to impose tariffs on imported steel and aluminum, the Daily Sun asked a group of engaged citizens – none is an elected official or a declared candidate -- to answer a set of questions. Following are their answers:

#1 Why do you think President Trump is proposing steel and aluminum tariffs, despite widespread criticism?

Carl Taylor: I see this as analogous to Trump’s campaign promises to resuscitate the coal industry – regardless of the reality that the future lies in renewable energy. Similarly, he made promises to some American workers in diminishing industries – like basic production of steel and aluminum that led them to believe that he would magically reverse decades-long trends, thus securing votes in some key industrial states. I believe this tariff declaration is entirely political in nature – given the near universal belief of almost all economists that it is a bad and outdated idea in a global interrelated economy.

Joy Staveley: I think President Trump is proposing steel and aluminum tariffs, despite widespread criticism, because it is encompassed in his nationalism and his America first agenda. I read in a recent Wall Street Journal piece that he feels American foreign policy has “lost sight of the national interest.”

Luis Fernandez: In all honesty, it is difficult to understand the logic. With Forbes and Republican Party leadership already opposing this decision, the choice seems more impulsive than strategic.

Dick Monroe: He genuinely feels trade has been an unlevel playing field caused by corporate self interests and Congressional unwillingness to negotiate toughly.

Ann Heitland: Trump certainly got out ahead of at least some of his advisors on this one since the White House Counsel was working on an analysis for him, which wasn’t supposed to be ready for another week, and the Gary Cohn, Director of the National Economic Council, resigned as a result. We do know that Carl Icahn, billionaire and friend of Trump, got advance notice so he could profitably short-sell stock in affected companies and that Wilber Ross, billionaire and controversial Commerce Secretary, probably influenced the decision. Beyond that, it’s inexplicable.

Donald Young: To get us on a level playing field. However, it wouldn’t surprise me if it was a bargaining chip thrown out there to get negotiations started.

#2 How should we weigh jobs in those industries vs. the risk of a trade war and higher costs of domestic goods?

Taylor: I grew up in a steel industry family, with my father being a senior person in a steel plant, and iron mining and manganese mining subsidiaries of US Steel. In addition, I attended college in Pittsburgh, once epicenter of American steel production. All of those industries and raw materials have globalized in my lifetime and I have seen many plants and operations shut down or centralized for reasons of efficiency and non-competitiveness. We will not recreate the world of the 1950s through tariffs and a trade war. On the other hand, we may do serious damage to our ability to produce and sell finished goods that use steel and aluminum, from whatever source.

Staveley: I’m not sure the tradeoff between jobs in the steel and aluminum industries will be worth a trade war. On the other hand, my guess is we won’t see the broad tariffs Trump is proposing, or a trade war. I think this may simply be Trump’s first negotiating session to try and make changes to NAFTA and perhaps the Trans-Pacific Partnership.

Fernandez: The issue is not a debate between local jobs versus trade war. Rather, what we should be worried about is the erratic process of decision-making, which was so quick and unexpected that it caught the President's own economic team by surprise.

Monroe: Try the tariffs and maintain a front that this is what will be in the future. You can always drop back, but poker players who have a strong hand and fold early lose the pot.

Heitland: One factor this question leaves out is the impact on other industries and workers who may be hurt and lose jobs if a trade war takes off; steel and aluminum fabrication may gain jobs but what about industries that depend on those materials, which will now cost more? Second, we need to recognize that only about 13% of lost jobs are due to globalization; the others have been lost to automation so starting a trade war is not going to solve the problem of fewer jobs in manufacturing. Third, while the U.S. has a large trade deficit in goods, we have a trade surplus in services and we’re globally dominant in highly profitable service sectors — like accounting, finance, technology, engineering and law. Fourth, of course, nobody wants to pay more for their washing machine or TV.

Young: Hopefully the President and his advisors put all the pluses and minuses together and decided we needed tariffs to protect American jobs.

#3 Should this issue have been handled differently by the White House? How?

Taylor: Fundamentally, we should not be raising tariffs on our trading partners at all – but if we are going to do so, one would expect a thoughtful process and analysis of benefits and consequences before doing so. Donald Trump’s impulsiveness has resulted in the resignation of his senior White House economic advisor and consternation in Congress and amongst our allies, like Canada and the European Union. This is a time in human history when collaboration and coordinated problem solving may be critical to our very survival and maintenance of a reasonable quality of life. The erratic sort of populist tribalism being shown by Trump is a total distraction from our genuine interests. I sincerely hope that other branches of government and citizens in general refute this way of conducting our national business.

Staveley: I am in favor of free trade, so I would have handled this matter differently, but to the extent these proposed tariffs may be valid, they should have been directed against China, which imposes huge tariffs against us. Other countries’ tariffs are small in comparison.

Fernandez: Policy should come from dialogue, negotiation, and careful analysis of the consequences. That was not the case here, nor in many other decisions being made in the White House.

Monroe: Instead of letting all know that this was a fulfilled campaign promise, the economics, defense readiness, and job impact should have been better explained.

Heitland: Of course it should have. The most obvious thing would have been to wait for the White House review that was underway. Then a discussion by the National Council of Economic Advisors headed by Gary Cohn. Negotiations with Congress. In other words, the usual process instead of presidential edict.

Young: No comment as that question is above my pay grade.

#4 Do you see direct or indirect impacts on Flagstaff?

Taylor: More than 100 trains per day come through Flagstaff and northern Arizona carrying goods to and from the U.S. Add in the large volume of products moved by truck – and then imagine a future economy where American and foreign goods are either unavailable or too expensive. This is the scenario of thoughtless trade wars. Every part of this country will ultimately be harmed by protectionism and cutting off beneficial trading relationship with the peoples of the world.

Staveley: The price of cars and other steel and aluminum products, and many name brand appliances (most of which are foreign), will go up. These increased costs could be substantial, and may negate the tax cuts for many. This would impact Flagstaff residents as it would citizens across the country.

Fernandez: The effects will likely unfold slowly and in the aggregate, making it difficult to predict precise consequences at the local level. Given that, look for regional consequences based on two factors : 1) how countries retaliate with their own tariffs, which could result in specific commodities becoming expensive, and 2) higher prices for aluminum and steel, which will affect industries that use those products.

Monroe: Remember when Walmart promoted American-made and the small price difference was worth it? With materials costs being generally less than 20% of the cost of goods, the impact should be small; we won’t feel much impact.

Heitland: The economy and national security are endangered by running the country in this way. Trade agreements are an important part of national security strategy. All of these are as important to Flagstaff as to the rest of the country.

Young: Not off the top of my head.

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