With tariffs, it’s a taxing time

Today the Trump Administration no longer is standing behind the American manufacturing worker—or the corporate leadership who employs them.
By Bob Vavra, CFE Media August 12, 2018
The National Association of Manufacturers (NAM) promotes the business interests of manufacturing in the U.S. Among the association’s stated goals on its Website is: 
“We cut through the noise and the political gamesmanship, and we provide the know-how and the muscle to ensure manufacturers in America have the power to advance values that make America exceptional—free enterprise, competitiveness, individual liberty and equal opportunity—and achieve big wins on priorities that will make us more competitive.”
On Jan. 20, 2017, NAM’s leadership was positively giddy over the inauguration of Donald Trump as president. “The cost of doing business today is keeping manufacturers from reaching their full potential, but starting today, we have a President who is focused on breaking down those barriers—and the NAM couldn’t be more excited to begin working with him,” said NAM president and CEO Jay Timmons in a press release. 
By the end of 2017, NAM reported that its membership had a 94% optimism rating about manufacturing, buoyed by the passage of a massive tax cut bill that lowered the corporate tax rate to 21%. “America witnessed history today as the House of Representatives passed the biggest, boldest tax reform in more than 30 years, and every member of Congress who voted for reform showed their constituents they are unequivocally standing up for American manufacturing workers,” Timmons said in another press release.
Today the Trump Administration no longer is standing behind the American manufacturing worker—or the corporate leadership who employs them. 
The looming trade war between the United States and—well, just about everyone—has NAM changing its tune, and it is pointing back at the same American manufacturing worker it once crowed were being championed by this administration.
Jay Timmons and the NAM membership know what you know—a tariff is a tax. They also know what you may not immediately know—business tax cuts serve to boost profits and improve shareholder value, while tariffs increase the costs of goods and services. When production costs increase, those costs are passed along to consumers, not taken off the bottom line. As a result, prices increase, negating the consumer benefits of any tax cuts.
To their credit, Timmons and the NAM leadership are trying to make this point. The giddiness is gone, replaced by a harder edge and a firmer tone. In a June statement, NAM officials said the proposed tariffs “put the U.S. manufacturing sector at a global disadvantage, undermining growth and job creation throughout the United States.”
The issue of steel tariffs, and the long-discussed dumping of steel from China on the U.S. market also caught the attention of Timmons. NAM favors a negotiated trade deal with China that addresses the issues of fair trade and intellectual property, two legitimate concerns. But Timmons also added in a statement, “Tariffs…are likely to create new challenges in the form of significant added costs for manufacturers and American consumers. In addition to these challenges, tariffs also run the risk of provoking China to take further destructive actions against American manufacturing workers.”
And in mid-July, after the Trump Administration added an additional $200 billion in tariffs on Chinese goods to the original list, Timmons clearly wasn’t happy. “More tariffs like these will punish America’s manufacturing workers—and could undermine our hard-won gains thanks to tax and regulatory reform, which have increased our global competitiveness over the last 18 months and led to higher investment and more American jobs.”
Tax cuts are fine. Keeping China from being a bad actor on the global trade stage is a worthy goal. Everyone wants free, fair trade. But in the last 18 months, the discussion has turned from manufacturing growth to job losses and legislation to lawsuits. We will see whether NAM can show off its know-how and flex its muscles to reverse this trend.

Bob Vavra, content manager at CFE Media, bvavra@cfemedia.com.