Tariffs and Local Pain

                                            Tariffs and Local Pain

By Albert B. Kelly

I don’t know how closely you follow the news these days, but it looks like the United States is moving ahead full steam with tariffs on steel and aluminum imports. I don’t know much about tariffs or trade or the nuances of import and export, but the one thing that stands out clearly is that the tariffs will raise the cost of these inputs to the detriment of various industries.

At first glance, when the discussion turns to things like trade policy and tariffs, the eyes tend to glaze over because it’s one of those topics that’s big and global and something that Washington DC should worry about because here on the ground, we’re busy worrying about plowing snow, picking up trash, fixing sidewalks and any one of a hundred things that come under the heading of “local”.

But then I remembered the old saying that “all politics is local” and when I thought about these tariffs and imports and exports and whatever else falls under that heading; it turns out that it’s really all local and the same goes for whatever may be coming down the line if we get into a spitting match with China and Europe and Canada and Mexico.

Many companies and industries buy steel and aluminum from overseas because it costs less than the stuff made here in the U.S. The companies in our country producing steel and aluminum, an industry which employs a total of about 140,000 nationwide, favor imposing tariffs because it levels the playing field and makes them more competitive with overseas suppliers. Fair enough.

But tariffs now mean that it will cost more and in some cases considerably more, for domestic companies and industries that rely on steel and aluminum, regardless of whether they purchase from overseas suppliers or from domestic suppliers. These companies will need to make up for these increased costs somewhere in order to get to their bottom line and it usually starts with laying people off and cutting payroll.

Now consider the employment landscape in our general area- what the Labor Bureau folks refer to as a “statistical area”- as in the Vineland-Bridgeton Statistical Area. To measure what’s happening on the ground around us in terms of labor and employment, they use specific categories that were developed as part of the North American Industry Classification System (NAICS).

These categories translate into the men and women who get up and go to work each day and I’m specifically thinking now of those in manufacturing, packaging, trucking, machine operators, freight, construction, engineering and other similar employment that is tied in some way to steel and aluminum inputs – industries where a tariff on steel and aluminum will have a direct impact.

Using these categories for our statistical area, we employ roughly 8,600 people in manufacturing, 2,500 in construction, 5,600 in transportation and material moving occupations, 820 in packaging and filling machine operators, 740 in heavy tractor-trailer drivers, and 2,200 in installation, maintenance, and repair.

How many of these workers will be impacted whether through layoffs or perhaps having hours cut (i.e., underemployed) because their companies cut payroll to absorb the increased price of steel and aluminum? We won’t know for a while, but when you consider that the unemployment rate was 13% for those in the manufacturing sector, 10% for construction laborers, 12% in production occupations, and 19% in transportation-material moving, this hit won’t be absorbed easily by workers.

I wonder about the backlash from other countries and the barriers they will place on the stuff we export around the globe. They could easily place tariffs on many agricultural products, glass bottles and plastic containers, machined parts and components, dairy products, and any number of other things we produce or manufacture for export from our little corner of the world and the impact is not insignificant.

According to analysis done by the Brookings Institute using data from the Census, Moody’s Analytics, the Bureau of Labor and Statistics and several other sources; just in the Vineland-Bridgeton statistical area in 2015, real exports from all industries combined was valued at $509 million translating into a total of 3,419 jobs supported by those exports- certainly no small thing.

So then yes, perhaps all politics are local, but then so too are the tariffs and trade wars and spitting matches with countries on the other side of the world which may ultimately play out in the lives of our relatives, friends, and neighbors.