WASHINGTON – U.S. President Donald Trump is declaring on Twitter a premature victory from his tariffs. Despite the manufacturing renaissance he claims, it’s too soon to determine the full scope of any benefit or harm they might create.
Trump is correct to say the tariffs should bring more money to the government. But it’s not a meaningful amount in the context of a multitrillion-dollar budget. Companies that deal the most with the imports that Trump is taxing have had to absorb higher prices, yet the president says the price increases barely register.
As for the steel sector, Trump can tout some new investments because of helpful government policy, but it’s too early to claim that his policies have catapulted the industry to new heights.
Here’s a look at the president’s tweets Monday and the reality behind them:
TRUMP: “Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country – and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be ‘Tariffed!”‘
THE FACTS: In trade talks with China, Canada and Mexico, it’s not entirely clear how much of an advantage the United States has gained from the tariffs. The import taxes imposed on steel and aluminum have been pressure points. So are the tariffs on $50 billion worth of Chinese goods, with the president suggesting he’s prepared to tax an additional $467 billion of imports from China. But Americans have to see a final deal with Canada or China to assess whether these taxes are delivering a better bargain.
Still, have tariffs brought in billions of dollars and jobs without increasing inflation?
Yes, the tariffs have brought in slightly more revenue. It’s hard to know if they’ve helped create jobs. And the companies closest to the tariffs say that, yes, inflation is a risk.
In theory, the tariffs should add money to federal coffers. The 25 per cent tax the Trump administration slapped on $50 billion of Chinese imports should raise $12.5 billion if the flow of goods continues without interruption.
And even though many tariffs haven’t been in place long enough to determine whether they’re helping draw in significantly more revenue, the Treasury Department said there has been a $5.4 billion jump in the collection of customs and duties so far this fiscal year. Some of this increase is due to more exports entering the United States. But customs and duties account for just 1.2 per cent of federal revenues, so any increase from tariffs does little to address the ballooning budget deficit.
The U.S. economy was adding jobs before the tariffs were announced, and it has been adding jobs since. It’s hard to know at this stage how the tariffs have influenced the pace of job creation, since any analysis would need to consider the whole of the nine-year expansion and the stimulus from Trump’s deficit-funded tax cut.
So, what about inflation?
Steel and aluminum prices can be volatile. But over the past year, steel and iron prices have jumped nearly 15 per cent, according to the Labor Department. Aluminum price growth increased in June and has since fallen. The companies surveyed by the Institute of Supply Management for its index of manufacturing growth say that the tariffs are a risk for both the likely price increases and the uncertainty they create. Out of the 10 companies cited in ISM’s survey, half reported concerns about the tariffs.
TRUMP: “Our Steel Industry is the talk of the World. It has been given new life, and is thriving. Billions of Dollars is being spent on new plants all around the country!”
THE FACTS: Trump has certainly helped steelmakers, but so far it’s not the dramatic turnaround that he portrays.
Analysts at Citibank said this month that steel companies have approved more than $3 billion in investment following the tariffs. Some steel mills have restarted old lines and added new capacity.
Manufacturers focused on primary metals have added 7,100 workers in the past 12 months for a total of 381,700 jobs, according to the Labor Department. But that total still lags the 402,600 jobs with primary metal manufacturers at the end of 2014. A stronger dollar and lower oil prices hurt the demand for steel products, causing production and employment to fall. And Trump is a long way from the more than 450,000 jobs in this sector at the start of 2008.
More importantly, steel is a modest component of U.S. job growth. Primary metals represented just 0.3 per cent of the 2.33 million job gains in the past year.