Trump's Tariffs Anger U.S. Manufacturers, Business Groups

(Bloomberg) -- Manufacturers and business groups slammed President Donald Trump’s decision to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico, warning of promised retaliation and calling it a tax on U.S. companies and consumers.

The U.S. Chamber of Commerce urged the administration on the eve of Thursday’s announcement not to proceed because the tariffs would hit U.S. manufacturers with higher costs, impede construction-sector growth and hurt job creation in both industries. Expected widespread retaliation from abroad would also threaten the economic momentum the administration has achieved through tax and regulatory reform, the chamber said.

U.S. steel prices are already almost 50 percent higher than those in Europe or China, and aluminum prices have been extremely volatile, the chamber added. The new tariffs “would add substantially to these challenges,” the group said.

“Months ago, the U.S. Chamber warned that alienating our strongest global allies by launching a tit-for-tat trade war would harm the U.S. economy and undermine American leadership,” Myron Brilliant, executive vice president and head of international affairs, said in the statement. “This is even clearer today.”

Trade groups weren’t the only ones complaining. Trump got pushback from members of his own party in Congress, who traditionally have supported free trade, including the leaders of both the House and Senate.

Price Increases

The Alliance of Automobile Manufacturers, the trade association for 12 producers in the U.S. including General Motors Co., Ford Motor Co., Volkswagen AG and Daimler AG, said expanding the tariffs will lead to higher prices for U.S.-produced materials that will be passed on to consumers. The Alliance urged a “careful re-evaluation of these tariffs so they address legitimate concerns” without harming users of the metals.

The administration’s actions have already caused higher prices for key products, said Cody Lusk, president of the American International Automobile Dealers Association trade group.

“American consumers will continue to bear the brunt of a trade war with our key economic partners,” Lusk said in a statement. “The decision to forge ahead with these steel and aluminum tariffs will adversely impact the price of consumer goods, including the millions of new vehicles Americans buy each year.”

Multiple Fronts

Auto-parts makers were already facing trade challenges and uncertainties on several fronts, including Nafta re-negotiations, previous tariffs on Chinese imports and possible duties on imported vehicles and parts, said Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association, which represents vehicle suppliers. The industry depends on regulatory and market stability, she said.

“These actions have thrown all of that up in the air,” Wilson said in a statement. “There is little doubt that the uncertainty and added costs the administration is creating will put U.S. investments and jobs at risk.”

Not everyone is complaining.

The American Iron and Steel Institute praised the move and said it supports the administration’s policy that any country granted an exemption from tariffs must be subject to a quota. “We thank the president for his actions to ensure a strong American steel sector that is fundamental to our national and economic security,” Thomas J. Gibson, the group’s president and chief executive, said in a statement.

EU Retaliation

The EU has indicated that it will impose tariffs on American-made blue jeans, t-shirts, and footwear, and the ability to export “Made in USA” products is essential for the health of U.S. manufacturing and its workers, the American Apparel & Footwear Association said.

“To make this move against our closest allies, especially during the renegotiation of Nafta, creates more difficulty and chaos for the business community,” Rick Helfenbein, the group’s president and chief executive officer, said in a statement. “Let’s be clear, Made in USA apparel and footwear will suffer as a direct result of this action by the Trump administration.”

The administration’s use of a “national security” rationale encourages other nations to do the same to keep U.S. goods and services of of their markets, according to a blog post from the Business Roundtable, a lobbying group for U.S. chief executives.

The Aluminum Association, representing producers including Alcoa, said it was disappointed by the tariff expansion because the real problem is overcapacity in China caused by “rampant, illegal” government subsidies, said Heidi Brock, the group’s president and chief executive officer.

Tight Supply

“Today’s action does little to address the China challenge while potentially alienating allies and disrupting supply chains that more than 97 percent of U.S. aluminum industry jobs rely upon,” Brock said in a statement. “During a time of record demand for aluminum in the United States, it is critical that aluminum producers across the value chain have a steady and reliable source of supply.”

Can-makers rely on metal imports because there is not enough domestic supply to support demand, according to the Can Manufacturers Institute, a trade organization. Members of the organization have applied for exclusions from the tariffs and are still waiting to hear back, Robert Budway, the institute’s president, said in a statement.

“The administration’s actions artificially create winners and losers in the very competitive packaging space,” Budway said.

‘Double-Digit Increases’

Commerce Secretary Wilbur Ross displayed cans of Campbell soup and Budweiser during a March television appearance, when he argued the tariffs would have not have a major impact on U.S. businesses.

Campbell Soup Co., however said that it expects to face “double-digit increases” on steel and aluminum prices, with the higher costs weighing on profit margins.

Freedom Partners Chamber of Commerce and Americans for Prosperity, part of the political network led by billionaires Charles and David Koch, said in a statement the tariffs and expected retaliation “will harm Americans and are a step back from a pro-growth agenda.”

The trade groups’ sentiments were echoed by some Republican members of Congress, who complained about targeting allies while raising prices on consumers and hurting the market for U.S.-made products. Speaker of the House Paul Ryan believes there are “better ways to promote the interests of American workers and consumers” and will pursue those options, spokeswoman AshLee Strong said.

Senate Finance Committee Chairman Orrin Hatch, a Utah Republican, said he will continue to push the administration to change course because of the “mounting evidence” that the tariffs will harm U.S. consumers. “Tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers,” Hatch said in a statement.

Republican Objections

Senate Majority Leader Mitch McConnell of Kentucky has heard from constituents and also will continue to raise his concerns directly with the president and his team, spokesman Don Stewart said. McConnell says “a trade war is not in the best interest of Kentucky’s economy,” Stewart said.

Representative Kevin Brady of Texas, the Republican chairman of the House Ways and Means Committee, said the tariffs announced today hit the wrong target because China -- not the EU, Mexico and Canada -- is the problem. “It hurts our efforts to create good-paying U.S. jobs by selling more ‘Made in America’ products to customers in these countries,” he said.

U.S. Senator Ben Sasse of Nebraska echoed that sentiment about China and called the tariff expansion “dumb.”

“Blanket protectionism is a big part of why America had a Great Depression,” said Sasse, who also alluded to Trump’s campaign slogan. “‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.’”

Canada is Vermont’s largest trading partner, and the state stands “to lose big under this ham-handed policy,” Senator Patrick Leahy, a Democrat from the Vermont, said in a statement. He said Trump’s actions are a path to “failed trade,” not fair trade.

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