Sure, it’s the season to be jolly and extend good will toward all, but the recent economic news isn’t making it easy.
Nearly full employment put grins on many faces last month and gave the President positive poll ratings on economic management. Now pundits explain that the federal deficit is soaring up to recession levels–$779 billion–and low unemployment means new jobs won’t be bringing it down much in the future.
Senate majority leader Mitch McConnell says we have no choice but to cut Social Security, Medicare, and Medicaid. Voters–even Republican voters–tell pollsters they’d rather send the 2017 tax law down the drain. And they have yet to see if the new withholding rates still leave them a refund. They were designed, after all, to boost the economy prior to the midterm elections.
The worst news, however, stems from increased tariffs on foreign goods and the retaliatory tariffs placed on U.S. exports.
GM says it will be closing five plants and laying off 14,000 workers because of the added expense of importing steel and aluminum plus and the added taxes on U.S. vehicles abroad. (Some hope that the announcement is meant to get concessions from workers, but wage and benefit cuts could hardly offset the tariffs.)
A 20 percent drop in the export of frozen potatoes to Mexico was topped by a 51 percent drop in dehydrated potatoes sold to China. Word is that a poor potato harvest in Europe is helping farmers stay afloat.
Soybean farmers lost about $12 billion in sales to China, and a doubling of storage costs have forced many to plow under their crops.
Tesla, 3M and other manufacturers see tariffs adding tens of millions of dollars to their costs. A government report indicates the drop in trade cut the third quarter gross national product by 1.5 percent.
These short-term problems were anticipated.
Does the long-term look better?
President Trump has said tariffs would bring manufacturing back to the United States. Although many politicians talk about creating jobs, most focus on infrastructure and education. Few dream that companies would give up the cheap labor costs overseas.
Some might, though, if they were assured that tariffs would stay high.
But that’s not happening.
Trump’s major reason for the tariff increases was to push for more favorable trade terms for the United States. Some of the agreements seem lopsided enough that one might suspect negotiators wanted to see jobs grow abroad so fewer people would be dying to get to Europe or the United States.
And new treaties are in the making.
Canada, Mexico and the United States signed a treaty in Argentina Friday. Reports are that the terms aren’t much different than NAFTA’s. We will learn more when the treaty goes before Congress for approval.
And China and the United States have at least agreed to stop escalating their conflict. The administration won’t be increasing existing tariffs on $200 billion of Chinese imports from 10 percent to 25 percent on Jan. 1 or adding tariffs to an additional $287 billion of Chinese products.
President Trump’s goal is good, but wielding tariffs like a big stick is a style America hasn’t used since becoming a superpower. It seems primitive and apt to backfire. But If China does open markets and honor our patents, however, President Trump will deserve some kudos.
Note this editorial by Judy Ferro published by Idaho Press – 2018