The confrontation between President Trump’s trade advisor, Peter Navarro, and Dr. Anthony Fauci, the administration’s top infectious disease expert, revealed differences in public health strategies. Of course, experts deserve nothing less than the toughest scrutiny. Choosing to air dirty laundry on subject matter in which he doesn’t advise the president earned Navarro an admonishment from the president “he made a statement representing himself. He shouldn’t be doing that.”
Besides committing to use the proper White House clearance process before publishing his opinions, Navarro should reflect on his record in estimating the cost protectionist tariffs would have on the economy.
For instance, back in 2018 just before the administration imposed 25 percent tariff on steel and aluminum imports, for national security, he was asked on Fox Business by Maria Bartiromo if the U.S. should expect retaliation. Navarro responded, “I don’t believe any country in the world is going to retaliate.”
The European Union, China, Turkey, India, Russia, even Canada and Mexico retaliated by imposing tariffs between 10 and 40 percent on $9 billion of U.S. exports.
But before the retaliation, price increases resulting from the tariffs are an intended consequence of the steel and aluminum tariffs- designed to divert demand from foreign imports to domestic producers by raising the prices of the imports. Yet, here too Navarro miscalculated saying the impact of higher prices on consumers would be “negligible to nothing.” He went on to explain a six pack of beer would only increase “a cent and a half at the most.”
International credit and risk evaluators at QBE found “soon after the tariffs were announced, the price of steel in the US jumped to levels far above most countries around the world — a 50% premium over European prices and 80% over Chinese prices.” As a result of the higher prices, economists found U.S. steel producers were significantly less competitive in international markets and experienced a decline in exports. It also meant foreign firms producing intermediate steel and aluminum products had an advantage in the U.S. The administration noted “import volumes of such derivative article[s] following the imposition of the tariffs exceeded the 4 percent average increase in the total volume of goods imported into the United States during the same period,” in its notice expanding the tariffs in January 2020.
On the ground, the tariffs and retaliation have had durable costs. Iconic Harley Davidson had to offshore export production to Thailand to escape from the annual $100 million in additional costs the trade taxes demanded.
The main benefit, protectionists argued, was supposed to be additional jobs in the U.S. steel and aluminum industry. Yet, economists at the Federal Reserve Board found the cumulative effect of all the tariffs in 2018 are “associated with relative reductions in manufacturing employment and relative increases in producer prices.” Putting a hard number on it, economists from Harvard and UC Davis estimate the tariffs deprived the economy of 75,000 fewer jobs in the manufacturing sector.
From May 2018, when the first tariffs were imposed to February 2020 (before the COVID-19 economy-wide lock down) the industry lost 4,000 jobs, according to BLS. Since then the industry has lost many more.