Editorial: U.S. aluminum tariffs an economic own-goal
U.S. tariffs on aluminum are likely to hurt them more than us.
July 31, 2018 By Patrick Flannery
Our cover looks a bit different than usual this month. Don’t worry, we aren’t turning into a political magazine. But I suppose it’s an example of how politics has infected everything in this age of Trump that the best approach to our big topic looks like a political cartoon. The U.S. tariffs on Canadian steel and aluminum have been greeted with head-scratching and condemnation by just about all responsible economic commentators.
It’s been well established for a very long time that trade protectionism accomplishes the exact opposite of what protectionists claim. People worried about business and job losses in a particular sector often convince politicians that allowing that sector to be exposed to competition from abroad will damage the economy. The proposed solution is either trade barriers like those imposed by the U.S., or subsidies for the affected companies like those extended to Chinese curtainwall manufacturers a decade ago. But the lesson of history is that these measures almost always inflict more damage than benefit on the broader economy.
Trade barriers attract a retaliatory response, as we saw last week in Ottawa’s imposition of tariffs on American aluminum windows and doors. That raises the price on those products and, let’s face it, makes it more likely that you as a Canadian supplier will also raise prices or at least not make efforts to go lower. I hear you saying, “Higher prices? Yes, please!” But if I’m a politician, I’m supposed to be looking at the whole picture. Higher prices on products mean consumers have to spend more for the same items, bringing standards of living down (at least until wages catch up – which erases the benefits to companies of the higher prices). Optional spending will be curtailed, leading to recession, which hurts everyone. Then there’s all the people who made a living importing, selling and servicing the foreign products that are now blocked or too expensive. Flip through this magazine and count the number of advertisements placed by American companies. If they ever decided to abandon the Canadian market, would you give me a job?
As outlined in our cover story by Treena Hein, the impact to Canadian glass fabricators of the aluminum tariffs is likely to be slight, since sourcing extrusions from Canadian sources is always a possibility. The greater impact will be to American fabricators and exporters of manufactured systems, who will see their costs rise. It’s unclear at this time if they will make any attempt to pass those costs along. but either way they end up impacted financially or in terms of reduced competitiveness. Trump doesn’t seem to understand that even the tremendous power of the White House doesn’t enable him to move the Canadian aluminum mines where the bulk of North America’s supply comes from. Of greater concern are the retaliatory tariffs on aluminum windows and doors that our government has imposed, which will certainly impact prices on contractors used to sourcing those products in the U.S. Perhaps it’s time to look for a domestic supplier?
In this World Cup soccer season, it sure looks like the U.S. has scored an own goal with these tariffs. Maybe they just aren’t that good at the game.•
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