Trade war threatens economic progress
Speaking on tariffs, regulatory reform and other federal issues of importance to the business community, John Kirchner from the U.S. Chamber spoke at this month’s Eggs & Issues on August 17, 2018 at the Chamber. His message delivered from D.C.: the recently achieved economic growth and positive legislative action comes with the reality that progress is threatened by the trade war.
Kirchner is the U.S. Chamber’s Executive Director for the Midwest region of Congressional and Public Affairs. He’s responsible for organizing grassroots activities among regional chambers and communicating business needs to federal officials.
The U.S. economy is growing again
Over the past ten years, the U.S. economy has been growing at a slow rate of less than 3% per year. Over the last couple of quarters the economy has been showing positive signs of growth. Indicators such as a growth rate of over 4%, an unemployment rate of 3.7%, and a wage growth rate of 2.7%, are all signs of a healthier economy. John attributed the economic health to reformed regulatory processes and tax reform.
Reviewing the business regulatory process
According to John, members of Congress have been making less decisions partially due to polarization but also out of fear of losing political power. Federal agencies have then had to fill in the role of decision maker by passing an increasing amount of regulations. Since 1976, federal agencies have introduced over 180,000 regulations. The U.S. doesn’t remove old regulatory rules when new ones are created, so the high number of regulations can act as a weight on business (up until 2017, they were costing businesses $12 billion a year).
This Congress has used the Congressional Review Act more than any other in 2017 to remove 67 regulations from the previous administration. The Act gives Congress the power to do so only for regulations implemented in the last six months of the previous outgoing president’s term since this is when an excessive amount are often employed to accomplish a president’s final political goals. The 67 rolled back regulations will save industry $570.4 million. The U.S. Chamber hopes to have more preventative actions in place by passing the Regulatory Accountability Act which would require an administration to get Congressional approval on any $1 billion or more regulatory rules and for agencies to choose the lowest cost option.
Tax reform passed quickly in December of 2017 after only two and a half months of debate. The last time the U.S. had tax reform was in 1986 under the Reagan Administration. Benefits such as lower corporate tax rates and ending double taxation have worked to the benefit of the economy by increasing U.S. competitiveness. Other countries or regions like Germany and the EU have begun lowering theirs to remain competitive. Additionally, states are seeing the price of services like electricity decrease (e.g. the residents of Main saved $100 million in their electric bills).
For more information on tax reform, visit the U.S. Chamber’s website.
“Don’t let anyone tell you that a tariff isn’t a tax.”
As this administration has had a more business friendly view when it comes to fewer regulations and corporate taxes in comparison to the last, their stance on tariffs and trade has become a pressing issue facing businesses. Earlier this year, President Trump imposed a 25% tariff on steel and a 10% tariff on aluminum under sections 232 and 301 of the Trade Expansion Act of 1962, claiming the action was necessary to protect national security. Steel prices have gone up about 50% and aluminum up anywhere from 10% - 130% since the tariffs were announced. Targeted countries responded with counter-tariffs which have further restricted trade and created a larger economic impact.
“Don’t let anyone tell you that a tariff isn’t a tax,” John said, arguing that even though they may have been implemented with the goal of protecting the U.S. steel industry and others, the tax dampens economic growth since increased prices in even not targeted industries gets passed down to consumers, and businesses have to lay-off workers to survive. “By our measurements, for every person benefited by these tariffs another 14 are hurt.” Kirchner said that the money businesses saved through fewer regulations and lower taxes will be going to pay for the tariffs. For example, Ford Motor Company saved $208.4 million from the tax cuts alone, but the projected cost of the tariffs will be $509 million in 2018 for the company.
Some have argued that the tariffs are part of a short-term negotiation strategy to make better trade deals. John noted that if you take into account the Administration’s discussion over adding $350 billion more in tariffs on the auto/auto parts industry and $200 billion more targeting China and the President’s history of praising tariffs, it’s likely that the tariffs are here to stay longer than most anyone would like.
How the tariffs are impacting the local economy
The tariffs do have a large impact on the national economy since one-half of manufacturing and one-third of farmland in the U.S. rely on trade, but the Wisconsin’s economy is also greatly impacted since its economy is so largely based on manufacturing and agriculture. 800,800 jobs in the state are supported by trade. Fluctuations in trade don’t just impact larger employers; 87% of the state’s exporters are small or medium sized. Local businesses have shared the tariffs’ impacts at home at a round table with Representative Kind at the Chamber on August 7. Read what they are up against and what is being done to advocate for business, here.
Other information: John Kirchner's PowerPoint from Eggs & Issues, State-by-state analysis of the tariffs' economic impact (U.S. Chamber), Mixed review for Trump policies from U.S. Chamber of Commerce official in Eau Claire (Leader-Telegram), Eau Claire Chamber's Eggs and Issues discusses trade war and international tariffs (WEAU 13 News)
Posted by: Kaylee Tracy, Legislative & Workforce Development Intern
Eau Claire Chamber
The Eau Claire Chamber of Commerce has more than 1,200 members.