President Donald Trump on Thursday (March 8) pulled the trigger on tariffs for steel and aluminum imports, with exceptions made for Canada and Mexico. The move was praised by the steel industry, but most members of Arkansas’ Congressional delegation said “unintended consequences” could result in more economic harm than good.
The President’s order places a 25% tariff on steel imports and a 10% tariff on aluminum imports, and created exemptions for imports from Canada and Mexico during the renegotiation of the North American Free Trade Agreement.
President Trump said during the tariff announcement he would be open to modifying or ending tariffs as conditions change.
“If the same goals can be accomplished by other means, America will remain open to modifying or removing tariffs for individual nations, as long as we can agree on a way to ensure that their products no longer threaten our security,” Trump said.
In a February 16 report, the Commerce Department recommended tariffs, noting the U.S. had 169 anti-dumping and countervailing duty orders in place on steel, of which 29 are against China. Also, according to the report, six basic oxygen furnaces and four electric furnaces in the U.S. have closed since 2000 and employment has dropped by 35% since 1998.
“President Trump is taking action today to protect both our national security and industries critical to our economy,” noted a statement from U.S. Commerce Secretary Wilbur Ross after Trump made the tariff announcement. “The President’s decision regarding the steel and aluminum Section 232 reports are the result of a long and well-thought-out process led by the Commerce Department. Once again, President Trump is keeping his promises and standing up for American families, American businesses, and American workers.”
The order includes a process to exclude tariffs on specific products in which the demand is not able to be met by U.S. producers or does not present a national security concern. The exclusion process is to be handled by the Commerce Department.
The steel industry praised the decision. The U.S. Steel Manufacturers Association said that since the 2009 financial crisis China began shifting production from excess domestic capacity to foreign markets. Chinese imports into the U.S. rose 15% in 2017 over 2016, with U.S. steel capacity utilization averaging 75%, “an operating rate far below the 85 percent necessary for a healthy industry,” the trade group noted.
POTENTIAL AGRI INDUSTRY IMPACT
The Chinese government responded quickly with threats against U.S. agricultural imports. China imports about $14.2 billion worth of U.S. soybeans each year and $550 million in U.S. cotton, another leading ag crop in the state, according to the United States Department of Agriculture. It’s the top agricultural export market in 2016, the USDA reported. Ag export growth has grown to China from $6.7 billion in 2006 to $21.4 billion in 2016.
Arkansas farmers grew 3.5 million acres of soybeans in 2017, and another 438,000 cotton acres. Arkansas exports an estimated $1 billion a year in soybeans and soybean products, according to the Arkansas Farm Bureau.
Analysis provided late Thursday by the University of Arkansas Division of Agriculture estimated a 25% retaliatory tariff on U.S. soy, rice, corn and grain sorghum would result in a $383 million loss to Arkansas’ agri sector.
“Agriculture in the United States is a potentially likely target for retaliation,” Eric Wailes, distinguished professor and L.C. Carter endowed chair of Agricultural Economics and Agribusiness for the University of Arkansas System Division of Agriculture, noted in the report. “Arkansas is a major oilseed and grain exporter to China, Canada and Mexico among others.”
The report said such losses “could adversely affect Arkansas employment by around 4,438 jobs, reduce labor income by $261 million and reduce overall value-added to the state economy by $383 million.”
Despite the potential threat to agri, the largest economic sector in Arkansas, U.S. Rep. Rick Crawford, R-Jonesboro, held to his support of the tariff action. Arkansas’ 1st Congressional District, which Crawford represents, is one of the most active soybean and other row crop producers in the nation, and also is home to Big River Steel and a major Nucor Steel campus.
“Our domestic steel industry has already been on the losing side of a trade war for years. I support the President’s decision to take action against countries illegally subsidizing and trans-shipping while providing exceptions for nations who can prove they aren’t undermining an industry critical to our national security,” Crawford said.
Gov. Asa Hutchinson, however, told Talk Business & Politics he is worried the tariffs will hurt farmers.
“President Trump has always advocated for tougher U.S. negotiations on trade deals, and I too support a harder line in these negotiations,” Hutchinson said. “But I am troubled that today’s announcement of tariffs on steel and aluminum takes negotiations off the table and leaves the United States vulnerable to retaliatory actions that could hurt our farmers and job creation in Arkansas. I would encourage the Administration to go back to the negotiating table so that we can avoid a trade war that hurts consumers and the economy in Arkansas.”
Arkansas Farm Bureau President Randy Veach said agriculture is the only sector in the U.S. economy with a trade surplus, and it will be damaged by any trade war. Up to 40% of Arkansas’ commodity income comes from trade, he said.
TARIFFS WILL ‘PROBABLY BACKFIRE’
U.S. Sen. John Boozman, R-Ark., said the tariff move runs the risk of “an all-out trade war.”
“I certainly agree with President Trump’s desire to protect American workers, but I do not believe that applying broad tariffs is the right means to that end,” Boozman noted in a statement. “The economy is doing well as a result of the tax cuts and our efforts to cut regulatory red tape. We do not want to stop that growth by creating an all-out trade war, and there is considerable concern that far-reaching tariffs might escalate to that level. The President has suggested that his policy will be applied with discretion. I encourage him to implement it in a manner that does not result in a situation that will hurt American exporters.”
In a Wednesday interview with The Washington Examiner, U.S. Sen. Tom Cotton, R-Ark., said Trump should not make the tariff move.
“I think that would be overbroad, it would probably backfire,” Cotton said. “It would probably hurt more downstream users of aluminum and steel than it would help the steel and aluminum producing sectors of our economy.”
U.S. Rep. Steve Womack, R-Rogers, said he was “extremely concerned” about Trump’s tariff action.
“Instead of inflicting unintended, negative consequences on American businesses, our eyes should be on unfair trading partners, such as China,” Womack said in a statement. “I ask the Administration to work with Congress as we enact meaningful legislation that will protect jobs in America, promote fair trade, and support the hard-working people of Arkansas’s Third District.”
U.S. Rep. French Hill, R-Little Rock, cited a specific possible negative impact on Arkansas’ economy.
“While I respect President Trump’s decision to protect American interests, I remain concerned with the unintended consequences that these tariffs on aluminum and steel will have – especially on Arkansas’s workers and employers,” Hill noted in a statement. “Tokusen U.S.A. in Conway, Arkansas, a company primarily in the business of manufacturing steel tire cord, could be negatively impacted by these across-the-board tariffs, and said the result would be ‘catastrophic’ for their business. Steel tariffs didn’t work when President Bush implemented them in 2002 or when President Obama proposed them on tires in 2009. I regret President Trump’s decision to implement these tariffs, because as recent history has shown us, they could ultimately backfire and hurt American workers and consumers.”
Most trade associations not representing steel or aluminum producers opposed the tariffs.
When asked about the potential tariff impact on the retail sector, Wal-Mart spokesman Randy Hargrove referred Talk Business & Politics to the Retail Industry Leaders Association.
“The decision by the Trump Administration to impose tariffs on steel and aluminum imports will have severely negative consequences for the American economy. These tariffs will have a downstream impact on every sector, and will raise the stakes for other countries to take retaliatory measures that will hurt America’s exporters,” Hun Quach, vice president of international trade for RILA, noted in a statement. “The administration’s desire to challenge other country’s trade violations is an important goal for free and fair trade, but new tariffs and potential retaliation could spark a trade war that zaps consumer spending and American exports — and that benefits nobody.”
The Associated General Contractors of America estimated a trade war over the tariffs could result in the loss of 30,000 construction jobs.
“These new tariffs will cause significant harm to the nation’s construction industry, put tens of thousands of high-paying construction jobs at risk, undermine the President’s proposed infrastructure initiative and potentially dampen demand for new construction projects for years to come,” said AGCA CEO Stephen Sandherr. “That is because the newly-imposed tariffs will lead to increases in what construction firms are forced to pay for the many steel and aluminum products that go into a typical construction project.”
The U.S. Chamber of Commerce also came out against the tariffs.
“The U.S. Chamber is very concerned about the increasing prospects of a trade war, which would put at risk the economic momentum achieved through the administration’s tax and regulatory reforms. We won’t drive the economy to over 3 percent growth or continue to create jobs if we go down this path. We urge the administration to take this risk seriously and specifically to refrain from imposing new worldwide tariffs on steel and aluminum,” noted a statement from Tom Donohue, CEO of the U.S. Chamber of Commerce. “These new tariffs would directly harm American manufacturers, provoke widespread retaliation from our trading partners, and leave virtually untouched the true problem of Chinese steel and aluminum overcapacity. Alienating our strongest global allies amid high-stakes trade negotiations is not the path to long-term American leadership.”