All of this chaos was avoidable, and tariffs should have been used as a last resort. Trump, instead, used them as his first action, with little regard for the adverse consequences to America’s economy and its workers.
Trump’s steel and aluminum tariffs, aimed mostly at China because of its dominance in producing these raw materials, demonstrates just how the President’s ill-conceived strategy has backfired.
Trump is right on one thing, however: China does cheat in trade in many ways — especially through currency manipulation, providing low-cost capital and tax relief to its “state-owned enterprises,” intellectual property theft and forced technology transfers.
But we should stop China’s cheating with the combination of diplomacy and balanced responses that don’t bring the United States to the precipice of another recession. We should also turn to the World Trade Organization to prosecute any “product dumping” cases. Under the WTO, an exported good is considered to be “dumped”, by a country or company, when its price is lower in the market that’s importing the product than it is in the exporter’s domestic market. This tactic undercuts domestic producers and can force them out of business.
If Trump continues to tariff Chinese goods, the real losers will be the American consumers, manufacturers and farmers who will bear the costs. These costs will be far greater than those borne by their Chinese counterparts simply because the Chinese purchase so much less from us than we do from them.
We need a new approach.
Trump should create a permanent Council on Manufacturing consisting of senior government officials, private sector leaders and labor representatives, to help the federal government develop smart manufacturing policies. Their goal: to increase the size of our nation’s manufacturing sector to 10% to 12% of total employment.
In the interim we must, within the rules of the World Trade Organization, target the underpinnings of China’s so-called “competitive advantage,” namely, its wide array of illegal subsidies. Most importantly, we can initiate anti-dumping complaints with the WTO to investigate if China is selling the US export goods below their home market values. If it is found that China is in fact dumping, then we can impose “countervailing duties” – import taxes imposed on specific goods in order to prevent such dumping and to counter the obvious export subsidies.
And fourth, we need to establish strict “buy-domestic/buy-American” procurement requirements on all future infrastructure projects which are funded or guaranteed either by the federal government or by the proposed national infrastructure bank currently being considered by Congress. No single measure would do more to resuscitate US manufacturing employment and rebalance our global trade in goods.
There are proven alternatives to Trump’s ill-conceived and impulsive tariffs. We just have to pursue them before more damage is done.