If there is one thing certain about the impact of President Trump’s trade policies, it is uncertainty.
What is happening with NAFTA, now known as USMCA? Are tariffs aimed at China the correct approach? Where does the European Union stand on recent trade policies?
The Buffalo Niagara Partnership’s Manufacturing Month Summit sought to find some answers with an exclusive appearance by Neil Bradley, Executive Vice President and Chief Policy Officer at the U.S. Chamber of Commerce. As the signature event to cap Manufacturing Month in October, the summit also included local manufacturing leaders in a panel discussion during which they shared experiences in navigating the current climate.
The Trade Question
According to Bradley, the U.S. Chamber of Commerce is an ardent free trade organization and always has been. He noted a couple of reasons.
- First, the Chamber always looks for customer opportunities for business growth. Bradley said that 95% of consumers who can buy products do not live within U.S. borders. “We want to sell them things that are made in America – from the crops we grow to manufactured goods,” he noted. “That also includes the services in which U.S. companies have become world leaders.”
- Furthermore, Bradley explained, the Chamber is a follower of Adam Smith – known as the father of economics – and the fundamentals of free enterprise economic systems. Those fundamentals teach us that one country can’t do everything well – companies and countries, like individuals, can do certain things very well, and those specialties give them competitive advantages. The exchange of those specialties is what makes free enterprise work.
In the U.S., we have the great benefit of being able to specialize and lead the world in areas such as manufacturing, intelligent design and services. As such, the Chamber shares the post World War II, bipartisan consensus in the U.S. for free trade. Our current president, Bradley explained, does not share that consensus.
Trump and Trade
Bradley noted the U.S. Chamber believes the president has gotten many things right for business as related to taxes, regulations, and energy development policy. On the subject of trade, the president has taken a different view than the Chamber, as he focuses more on the detriments and harm he sees in free trade. The Chamber disagrees.
Bradley gave examples of where the country is today with respect to trade policy under the current administration:
- We have the highest level of tariffs imposed on imports into the United States since the early 1930s, resulting in the highest levels of retaliatory tariffs from other countries on U.S. imported goods. Bradley said these tariffs are having a negative impact on the U.S. economy.
- The good news, Bradley countered, is there are a lot of other great things going for the economy. Tax relief, regulatory relief, and getting back to our historical norms of 3%-plus economic growth means that we can absorb some of the negative impacts of tariffs. But that doesn’t mean they are any less negative, Bradley added.
- New York State is hit particularly hard by the negative impact of tariffs imposed on Canada, Mexico, the European Union and China. Bradley said research shows retaliatory tariffs of these countries hit more than 10% of the exports coming out of the state of New York.
Bradley noted that we saw the tariffs’ negative impact on the nation’s economy during recent swings in the stock market. He gave the example of Caterpillar, a leading manufacturer of construction and mining equipment, that uses a lot of steel.
The manufacturer reported their costs were going up due to tariffs and they were going to have to pass those costs along to consumers where they could. The market looked at that and other manufacturers and recognized such a situation is unsustainable in the long-term – stocks went down.
Neil Bradley looks at trade disputes and progress being made to find solutions
NAFTA to USMCA
The U.S. Chamber of Commerce believes that President Trump got it absolutely right when it came to renegotiating the North American Free Trade Agreement (NAFTA) according to Neil Bradley. He pointed out that NAFTA was a two-decade old deal that did not reflect the modern economy. It was written before the internet, with no provisions on digital goods such as smart phones – areas where the U.S. has an advantage.
The revamped trade arrangement – the United States-Mexico-Canada Agreement (USMCA) – updates the deal to reflect the digital world, adding new protections for intellectual property (IP) including IP in health care, manufacturing and other sectors.
Having said that, Bradley also noted that the Chamber thinks the USMCA went backward in some areas. For example, with respect to U.S. companies wanting to sell to the Canadian government, the U.S. lost some of the protections that assured access to that market under NAFTA. Perhaps more importantly, the revised agreement did not end the tariffs on steel or aluminum imports into the U.S., and, as a result, Canada and Mexico did not lift retaliatory tariffs.
“The president is a negotiator and he is holding on to those tariffs as leverage in the hopes that there may be some concessions down the road,” Bradley explained. “We do not agree with this approach and are working to help the administration see the light on rolling back some tariffs.”
The European Union
Bradley next turned to the European Union (EU) where the U.S. similarly imposed tariffs on steel and aluminum imports with the same results – retaliatory tariffs on all kinds of products. He said negotiations have been opened with the EU to try to resolve some of the tariff disputes, particularly on steel and aluminum.
He noted those talks are going expectedly and notoriously slow. That is because the U.S. is negotiating with all the EU’s equal member states who must come together and agree on any resolutions. Bradley said the Chamber sees this as a multiple month if not yearlong process, but will continue to play a role in helping the administration in sorting out these difficult policy issues.
If the U.S. Chamber of Commerce thinks the president is right in his approach to NAFTA, they believe he is even more right in his dealings with China.
“The president understands the problems the nation faces as a strategic competitor with China,” Bradley said. “They are stealing U.S. intellectual property and forcing U.S. companies that want to do business in China into enforced partnerships with the Chinese government. Their government then knows the technology and the business plans of U.S. companies.”
The situation is a global problem that all countries – not just the U.S. – face with respect to China said Bradley. And it is getting worse, not better. The Chamber believes the president is right to tackle the problem. The question is whether tariffs are the answer. Tariffs may be counterproductive in that they push China to do more business with the EU and countries such as Japan.
Bradley outlined a three-pronged approach the U.S. Chamber is recommending to the administration to address the China problem without tariffs.
- Be clear about the problem and have no equivocation about what we expect from China – end the IP theft and forced government partnerships.
- Join in common league with our allies in fighting the problem collectively. That means working with the World Trade Organization (WTO) and using the powers we have created there.
- Be iron-nosed about our national security issues. Using 5G technology as an example, Bradley pointed to the U.S. saying no to giving China and its government-owned operations access to our markets for this technology. While not a free trade issue, it is exactly the kind of national security position the U.S. should be taking according to the Chamber.
A Policy Agenda
What are the issues the U.S. Chamber of Commerce believes the government needs to address in a policy agenda?
When asked what he thinks he thinks might happen in the mid-term elections, Neil Bradley responded he will not be surprised at whatever the outcome may be. Either way, there are sure to be many new faces in Congress and that presents an opportunity for the U.S. Chamber of Commerce to educate and advocate for the business community.
The polarization of politics between the two parties has left many policy challenges unaddressed, Bradley noted. The Chamber has put together a policy agenda of the issues they believe the government leaders need to address – no matter who is elected. The issues include:
On one hand, Bradley said it’s a great problem to have in the U.S. – more job openings than people looking for work. On the other hand, he explained the problem is not only a skills gap facing employers, but a pure gap of people. Companies cannot find job candidates. It is the number one concern Bradley has heard from companies across the nation.
Calling the people gap the greatest structural hindrance to the country’s future economic growth, Bradley said the Chamber believes a workforce agenda is a central issue that must be taken up whoever is in charge of the next Congress.
Related to workforce, Bradley pointed out that legal immigration helps our economy by bringing in people with the skill sets employers need. Without immigration, the U.S. has an even tighter workforce environment. As another top priority, the Chamber is advocating for a sensible immigration policy that can help meet workforce needs.
Don’t just think of roads and bridges when we think of infrastructure Bradley instructed. He said we are long overdue in investing in infrastructure that also includes water systems, storm resiliency and a 5G computer network. He noted the Chamber’s role is to work with the public and private sectors in deploying funding for infrastructure investment.
As much as workforce, immigration and infrastructure are seen as policy priorities by the Chamber, Bradley said perhaps the greatest challenge facing business is the polarization of our political leaders.
“Our biggest challenge is how to restore trust in government and promote cooperation between the parties,” Bradley concluded. “We think the business community has a role in demanding more of our elected officials on the local, state and federal levels in terms of finding common ground and taking on the challenges facing business.”
Following his presentation, Bradley joined a panel of local manufacturers to discuss the impact of trade policies in Buffalo Niagara. With Grant Loomis, Vice President of Government Affairs at the Partnership, and Jerry Sheldon, Executive in Residence for the Partnership’s Manufacturing Council, serving as moderators, the panelists included:
- Andrea Heinold, Controller at SoPark
- Rick Smith, President and CEO of Rigidized Metals
- John Young, Executive Vice President and COO of Welded Tube
John Young explained that the tariff problem has made it extremely difficult for the Canadian-based steel pipe and tube manufacturer to be profitable in Canada. With operations in Lackawanna, NY as well as Canada, the company is hit by a 25% tariff imposed on steel imported to the U.S. and then by the retaliatory 25% tariff imposed by Canada. Young said the company is seeking blended solutions to the problem, working with customers to order only what they need now and looking to see when the tariff issue may be resolved.
Rick Smith explained that everything Rigidized produces is metal, so they are significantly impacted by the 10% tariff on aluminum and the 25% tariff on steel imports. He noted stainless steel prices have risen about 39% and that is all domestic supply. The cost of aluminum – when they can get it – is up 67 cents a pound. Smith said the company has no choice but to pass that cost on to customers.
Andrea Heinold said SoPark is a contract electronics manufacturer that produces printed circuit boards for a wide variety of OEM clients. The company purchases components from three large distributors in the U.S. who are passing on the costs of tariffs to SoPark. Heinold said SoPark is challenged to provide transparency to customers as to how the tariffs are resulting in increased costs of their printed circuit boards.
From the perspective of our local manufacturers to the national view of the U.S. Chamber of Commerce, trade policies of the current administration are having a negative impact on the business community. The Buffalo Niagara Partnership will continue to bring our members important information on the impact of tariffs and the status of trade policies moving forward.
The Partnership would like to thank Neil Bradley and our panelists, Andrea Heinold, John Young and Rick Smith for participating in the Manufacturing Month Summit. We also thank our sponsors who made this exclusive event possible.