The Baytown region is heavily dependent on foreign imports and exports, but the Trump administration’s trade policy could undermine the prosperity of the community.
Right after he took the oath of office, Mr. Trump immediately withdrew from the Trans Pacific Partnership (TPP), a proposed treaty that included all of North America, east Asia, and many other Pacific rim nations. This treaty would have reduced tariffs on American exports to over a dozen nations across the Pacific Ocean. The TPP lives on, but America is on the outside looking in, having lost preferred access to key foreign markets.
Negotiations over the North American Free Trade Agreement (NAFTA) continue to drag on, and Mr. Trump has threatened to pull out of NAFTA altogether if America does not get its way on a range of issues from autos to agriculture. Originally negotiated in the 1990s, NAFTA has been a boon to Texas and Baytown. Backing out now will only hurt the petro-chemical industry and the port of Houston.
The President has also slapped tariffs on steel and aluminum imports from long time American allies in Canada and Europe. This directly increases production costs for local manufacturing firms, and it invites retaliatory tariffs on American exports. In a nutshell, these tariffs aim to protect 140,000 steel workers at the expense of several million American jobs that depend on cheap steel.
Furthermore, trade wars negatively impact American consumers. Steel tariffs will drive up the cost of cars, trucks, and appliances. Even if you buy a truck made in America, there is a good chance that some of the parts will come from suppliers in Japan, Canada, and Mexico.
Defenders of the administration argue that tariffs are just a negotiating strategy to get bigger concessions from our trading partners, but this bluster is creating an atmosphere of uncertainty. Business and investors hate uncertainty, and they will be reluctant to invest and create jobs until the dust has settled.
The Trump administration firmly believes that past trade agreements have killed American jobs and decimated the American manufacturing base. There is some truth to that argument. Globalization of the economy has led to out-sourcing of jobs to less developed nations, but tariffs are not going to bring those jobs back.
Even if tariffs could bring some jobs back to America, we will not see a re-birth of the well-paid middle class factory worker. Increased automation and mechanization of factories will produce goods with only a fraction of the workforce. Technology is replacing American workers, not Mexicans and Chinese.
The real problem facing the American worker is lack of education and training. Tariffs won’t fix that.
Steve Showalter is a government professor at Lee College in Baytown.