President Donald Trump may have softened some of his rhetoric on international trade, but Sen. Doug Jones is continuing a bipartisan effort to mitigate the threat increased tariffs and a potential trade war pose for Alabama businesses.
Tariffs, which are taxes a government collects on certain imported goods, have been a staple of Trump’s trade policy. This has been especially true over the past few months as his administration has tried to make good on a promise to renegotiate “bad deals” between the United States and some of its longstanding trading partners.
Some of those deals have helped avoid tariffs on American-made goods for years, but in some cases even the threat of tariffs can motivate countries to come to the negotiating table. That seems to be the end goal of the recent tariffs Trump has levied on products from countries in Europe, Asia and North America.
“Either a country which has treated the United States unfairly on trade negotiates a fair deal, or it gets hit with tariffs,” the president wrote on Twitter last week.
Donald Epley, CEO of Coastal Economics and a former director of the University of South Alabama’s Center for Real Estate and Economic Development, told Lagniappe those types of deals are the best approach to international trade, but added there can be negative impacts as countries look to retaliate with their own tariffs.
“A tariff, a customs duty … it can be any other label, but it’s essentially a tax,” he said. “What Trump is trying to do is to establish new trade agreements, and that’s the way to go, but if he can’t do that quickly, he will eventually have to address these tariffs and go after those keeping American products out of other markets.”
In May, the administration moved to impose tariffs on imported steel and aluminum from the European Union (EU), Canada and Mexico, and all three have responded with billions of dollars of their own tariffs targeting various U.S.-made goods. Likewise, China has begun adding a 25 percent tax on various U.S. imports — including pork and soybeans — in response to tariffs imposed on Chinese goods in June.
So far, some of hardest hit have been the automotive and agricultural industries, which are important economic drivers in Alabama. In 2017, the Yellowhammer State recorded $10.9 billion in automotive exports, while a $155 million soybean industry accounted for more than 11,000 jobs statewide.
In June, Trump threatened to impose a 25 percent tariff on all foreign automobiles and auto parts entering the U.S. and ordered the U.S. Department of Commerce to launch an investigation into whether those imports present a threat to national security.
That led Gov. Kay Ivey, who has been an ardent supporter of Trump, to issue statements carefully objecting to any of his policies that might negatively impact Alabama’s largest global export.
“The largest importers of Alabama-made goods and services were Canada, China, Germany, Mexico and Japan — all countries which may be forced to reciprocate in response to any new import tariffs,” Ivey said in June. “I strongly oppose any effort that may harm those companies that employ thousands of Alabamians.”
Even with pushback from his own party, Trump has — for the most part — held firm on his approach to international trade, even as his administration has taken steps to soften the blow certain retaliatory tariffs have had on industries in a number of states that helped elect him back in 2016.
Last week on Twitter, Trump called tariffs “the greatest,” but less than 24 hours later held an impromptu news conference with European Commission President Jean-Claude Juncker to tout an agreement that would prevent any new tariffs while both entities work toward a mutually beneficial trade agreement.
The administration also announced a $12 billion emergency aid package for farmers affected by foreign tariffs on their crops, including thousands who produce soybeans in Alabama. China is the largest consumer of soybeans by far, and the price has plummeted to remain competitive with countries that aren’t subject to the new tariffs.
However, the aid package has been criticized on both sides of the political aisle as a “bailout” — a temporary, taxpayer-funded solution to a self-imposed problem. And with midterm elections just a few months away, others have questioned whether the timing is politically motivated.
“Soybeans, cotton, corn, poultry producers, pork, beef — everybody is concerned about this, and the $12 billion aid package, while appreciated, is nothing more than a Band-Aid,” Jones said. “These farmers and everyone connected to the industry, they want trade, they don’t want aid. They’re not looking for a bailout.”
However, Jones’ legislative efforts have focused on the automotive industry.
While the agreement with the EU announced last week was good news for some, most of the large auto manufacturers in Alabama are based in Asia, such as like Hyundai (South Korea) and Toyota (Japan), and even companies like Mercedes-Benz use components imported from countries outside Europe.
That’s why Jones has continued to push a bill he co-authored with Tennessee Sen. Lamar Alexander that would prevent proposed tariffs on imported automobiles and automotive parts from going into effect without a second opinion from the U.S. International Trade Commission.
While Jones said he supports any effort to strike better deals with America’s trading partners, he doesn’t think it should be at the expense of one of Alabama’s largest job creators. He also urged Trump to drop the “ridiculous claim” that auto imports from Europe and Asia could pose a threat to national security. So far, Commerce Secretary Wilbur Ross has given no indication he’s planning to end that investigation.
In Mobile specifically, it’s difficult to to estimate how new or continued tariffs might affect local industries.
Epley said the research data available to economists can’t predict that kind of impact because tariffs are imposed on specific goods, not entire industrial sectors. Fortunately, some of the Port City’s largest employers say they haven’t seen much of an impact so far. However, they are watching very closely.
“We have deep concern over the potential impacts of tariffs,” Jimmy Lyons, president of the Alabama State Port Authority, said. “If things are not resolved soon, and we’re faced with a protracted trade war, our customers are beginning to advise us that the port will lose business.”
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