You thought we were in a trade war, manufacturers? You’ve seen nothing yet.
Last week, the U.S., under President Donald Trump, broke off trade talks with China aimed at ending a trade war. It appeared the two sides were close to a settlement. But things went awry.
Manufacturing already has felt the impact of trade fights started by the Trump administration. This has been a recurring theme of the monthly reports from the Institute of Supply Management. ISM reports a manufacturing index, based on a monthly survey of purchasing executives.
The U.S. and China had cooled off the trade fight while the two sides negotiated. But that crashed and burned last week.
So now, the U.S. has said it’s boosting tariffs on billions of Chinese goods and is moving to raise tariffs on billions more.
The administration is peddling a story line about how China is paying the tariffs to the U.S. In reality, the companies that import Chinese goods pay the tariffs. For the most part, those companies pass the increased costs to their customers.
Larry Kudlow, one of Trump’s economic advisers, acknowledged to Chris Wallace of Fox News the reality of how tariffs work during a Mother’s Day interview.
“Fair enough,” Kudlow told Wallace. “Yes to some extent,” Kudlow added. “Both sides will suffer on this.”
Regardless, manufacturing already is suffering from the trade war. Motorcycle maker Harley-Davidson already is feeling the impact.
What’s more, the Trump administration is studying whether to impose still more automotive industry tariffs. The U.S. negotiated a trade agreement with Canada and Mexico intended to take the place the North America Free Trade Agreement (NAFTA). But that pact still hasn’t been ratified.
Worse case scenario: The current U.S.-China trade war expands while the U.S. opens up a new auto industry fight.
President Trump likes to criticize his predecessors. According to him, those predecessors didn’t do enough.
Trade Is Hard
The thing is, trade is not easy. Trump’s predecessors juggled various conflicting concerns about trade along with national security and other issues.
Manufacturing has been in the middle of these debates for decades. When Trump came to power, major manufacturing groups such as the National Association of Manufacturers supported Trump.
Still, in the third year of Trump’s administration, things are more complicated that manufacturers envisoned.