It’s great news that U.S. President Donald Trump has agreed to end the tariffs his government imposed last year on steel and aluminum imports from Canada and Mexico. There’s no other way to describe it.
The tariffs, which provoked retaliatory measures, were widely opposed by economists and business leaders, including the Association of Equipment Manufacturers, whose 1,000 member companies include dozens of makers of service trucks and their accessories. As our front page story in this edition on the removal of the tariffs indicates, the duties weren’t popular with industry insiders on either side of the Canada-U.S. border.
Don Moore, director of government and industry relations with the Canadian Transportation Equipment Association, summed up the feelings of relief: “I think everybody’s pretty happy that the tariffs are out of the way. There’s still a lot of uncertainty and a lot of things have to settle out, but everybody’s feeling a little more positive it will go in the right direction. We can now focus on other things.”
Fortunately, the tariffs took effect while the economies of both countries remained strong a decade after the Great Recession struck. Initially many manufacturers absorbed the additional costs. But as those costs began to mount, manufacturers had to pass the increases along to their customers.
Now that the tariffs are gone, though, don’t expect the prices to drop to pre-tariff levels soon. Prices tend to be sticky — as anyone who has noticed the disconnect between crude oil and gasoline pump prices knows all too well.
As Steve Latin-Kasper, market data and research director for the National Truck Equipment Association, observed: “It took about a half a year for pricing to stop adjusting to the tariffs between April and the end of 2018, and you’re probably going to see that same process now of price adjustments as we go forward.”
The rationale for the tariffs were specious to begin with: no reasonable person believes that Canadian exports pose a security threat to the U.S. The notion that the tariffs were a bargaining chip in the negotiations to replace the North America Free Trade Agreement is also dubious. Even after the tentative replacement — the U.S.-Mexico-Canada Agreement — was reached, the tariffs remained in effect for no apparent reason.
President Trump even took it upon himself to dampen the celebration around ending the steel and aluminum dispute by turning around and imposing a five percent across-the-board tariff partner on Mexico.
As AEM president Dennis Slater noted in a recent news release, “Tariffs are taxes on Americans and this decision will only hurt U.S. manufacturers, including many of the 1.3 million men and women our industry employs.”
However, a week later Trump announced that the tariffs on Mexico were suspended after Mexico agreed, among other measures, to take “unprecedented steps to increase enforcement to curb irregular migration,” according to news reports. Of course, by the time this edition goes to press, the president might change his mind again. Treasury Secretary Steve Mnuchin even noted that Trump retains the authority to revisit the tariffs should Mexico not live up to the terms of the agreement.
When Trump announced the end of the steel and aluminum tariffs on Canada and Mexico, the AEM praised the move. However, the association also called upon Congress to ratify the USMCA. That would “help our farmers sell more of their products at a time of incredible economic difficulty,” Slater said in a news release at the time.
Even if the tariff reprieve toward Mexico and Canada remains in effect, the issue of increased tariffs on Chinese goods threatens to escalate the trade war between the world’s two largest economic powers. The effects of those tariffs are real on actual businesses, such as Cincinnatt-based Venco Venturo Industries LLC, whose products include service truck cranes.
Company president Brett Collins said the U.S.-China tariffs have resulted in successive price hikes. “We’ve been shopping, looking around for alternatives, and there’s a few here and there. But we don’t automatically have domestic alternatives to key components that are only manufactured in China,” Collins said.
The AEM, among other groups, has consistently denounced those tariffs as harmful to the bottom lines of businesses as well as their employment prospects. “We need our elected officials to make it easier, not more difficult, for American businesses, manufacturers and farmers to be competitive in a 21st century global marketplace,” the AEM’s Slater said in one of several public comments on the matter.
That makes abundant sense, considering what century this is.
