OPED: Cold spring for trade in U.S.?
We live in an increasingly global society, to our delight or chagrin, it is the current nature of our world. Businesses care little for parochial distinctions as they compete, often internationally, for production, market share, and workforce talent. Make no mistake, our Commonwealth and region competes on a world stage and the policies that govern these global markets have an impact internationally and here at home. After a year of uncertainty, Republicans delivered a tax policy win. In spite of long term deficit concerns, the tax reform will stimulate activity, with the immediate effect in the United States driven mostly by investment in response to expected corporate income growth.
The U.S. economy continues projected growth at just shy of 3 percent. Unemployment continues to decline and hovers around 4 percent. Our economy inches closer to full employment. As a result, wage growth is expected, a factor that has eluded economists and the middle class, despite nine straight years of steady growth, the second longest bull market in the Post-WWII era. Meanwhile, businesses expect more on-hand access to capital and can plan for growth, investment, and expansion.
This paints a rather rosy picture of current conditions. Which makes a trade war wholly unnecessary and potentially harmful. Initiating a trade war will stifle further economic growth, and likely reverse course for many middle-class Americans, who are finally set to reap the benefits of nearly a decade of straight growth.
The greatest gift government can grant our economy is predictability. 2017 was certainly a year of uncertainty from Washington D.C. However, in spite of that we continue to make considerable strides forward as a nation and a Commonwealth. The President’s proposed tariff adjustment on steel and other products, could offer some consolation to steel states, such as ours and Ohio, from a boost in production and a reduction in the influx of foreign materiel.
While this may be viewed as a positive for the American steel industry, employing approximately 140,000 Americans strong. Every action has a reaction. This proposed tariff shift comes with an expected economic contraction of growth by 0.1 percent, the cost of which is 190,000 American workers.
Taken on its own, this may be but a blip on the radar. The fear, however, is that this starts an international retaliatory tit-for-tat, not only with China and Russia, but with allies such as Canada and Mexico. All of this casts an air of doubt on policies such as NAFTA, policies that American businesses have depended upon and made considerable investments as a result. Isolating our country and its tremendous economic might from the international stage serves little interest as a whole, and satisfies too few. The impact to Pennsylvania could be negative, given the potential to inure relations with Canada and Mexico, two countries that Pennsylvania based companies work closely with across borders.
This type of economic disruption is unnecessary given the current state of our global economy. A multi-front trade war could lead to inflation in the cost of consumer goods, could chip away at our economic growth, and arrest the potential of steady wage growth. While this one tariff policy change proposed by President Trump does not absolutely predict these negative repercussions, a chain reaction of confrontation and stifling global trade most assuredly does. All of this, taken as a whole is bad for business and bad for our middle class.
Unfortunately, presently the only certainty from D.C. for the foreseeable future is uncertainty. Therefore, one solution would be to tamp down inflammatory rhetoric. This unnecessarily alarms the market economy and fuels insecurity. Pacifying tensions will encourage continued growth and confidence. Further, embrace our international inter-connectedness, and recognize that the Fourth Industrial Revolution resides in the Connected Economy. In doing this, it does not preclude the President from pursuing an agenda that reexamines and renegotiates trade agreements, to the benefit of our country. But it does take the chill out of a potential cold war on trade.
Kevin J. Schreiber is the President & CEO of the York County Economic Alliance and former Pennsylvania state representative.