free trade is preferable to bailouts

Published 12:11 pm Thursday, August 9, 2018

The federal government announced July 24 that it would be funneling up to $12 billion in aid to American farmers hurt by the escalating trade war brought about by U.S. tariffs placed on foreign imports.

The necessity to subsidize or prop up agriculture to this extent should provide clear evidence that President Donald Trump’s wide-ranging list of duties placed on imported aluminum, steel, newsprint and other raw materials and produced goods from Canada, China, Mexico, European Union countries and elsewhere are hurting, not helping, American industry.

While some American farmers might experience a degree of relief in the short term, no one wins in the long run when a flawed policy necessitates bailouts of this magnitude.

Email newsletter signup

The coming bailout of farmers also creates a precedent the administration can’t afford and will have to confront repeatedly as other industries come with hat in hand seeking assistance.

Farmers aren’t the only group negatively impacted by the president’s trade policy. Retaliatory reaction by other countries hitting the U.S. with taxes on exports flowing across their borders is taking a heavy toll on a wide range of industry segments from the largest consumer goods, such as automobiles, to the smallest of appliances and everything in between, including bourbon, a Kentucky signature product.

Even ours, the newspaper industry, is suffering the consequences of unjustified tariffs imposed on newsprint coming into the U.S. from Canada, the supplier of roughly 60 percent of the U.S. market.

The gamble of Trump’s foreign trade policy is based on the supposition that raising the price of foreign products through tariffs will make American product alternatives more attractive to the consumer market.

Higher American-made consumption will benefit U.S. industry and the economy as a whole, the premise goes.

The problem with this theory, as most economists point out, is tariffs put U.S. manufacturers in the precarious position of having to pay higher prices for the raw goods needed to produce their products. These higher production costs are passed along to the consumer through increased prices, ultimately causing consumption to go down. Lower consumption leads to the manufacturing having to cut costs, negatively impacting wages and employment. Businesses lose sales and employees lose jobs.

The president’s views on tariffs are clear as evidenced by a Twitter post last week, “Tariffs are the greatest!”

Not everyone agrees — especially those in the real world who are left to pay the costs through increased consumer prices and resulting bailouts paid for with American tax dollars.

Congressional leaders, both Republican and Democratic, decry the trade war and its impact on the economy. But newscast rhetoric will not solve the growing problem. Removing the tariffs and opening the global door to free trade will.

The News-Enterprise