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March 2, 2018

Giovanetti, Matthews Warn of Negative Impact of Tariffs, Trade Wars

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“By imposing stiff new tariffs on imported steel and aluminum, Trump just encouraged U.S. manufacturers to move their facilities overseas,” tweeted IPI president Tom Giovanetti after this week’s White House trade announcement.

“The most basic principle of trade is that you should evaluate trade based on what’s best for consumers, not what’s best for producers,” said Giovanetti. “A BAT (border adjusted tax) would have been far preferable than high tariffs and a trade war… Trump was against the border adjusted tax for the same reason he’s against multilateral trade agreements— he doesn’t want POLICY — he wants to be able to exert pressure on specific parties.”

In January when the White House announced a decision to impose tariffs on foreign-produced washing machines and solar panels, Giovanetti warned in a radio interview with Dallas-Fort Worth’s WBAP Morning News, "These tariffs are not going to help American consumers or producers and will partially undercut the gains of tax reform."

The negative impact of tariffs on consumers are real, as noted by Dr. Merrill Matthews in a Policybyte on the ripple effects of Obama-era tariffs on steel imports, which led to an upswing in prices on domestic steel. “Because steel is used in so many products, those price increases—both from import tariffs and from U.S. steel price increases—will filter through the entire economy,” wrote Matthews. “The price of everything will be directly or indirectly affected.”

In the same piece, Matthews continued: “One important lesson from the steel tariffs is that companies and industries that beg for and receive government protectionism often take advantage of the situation by pushing up prices as quickly and as high as possible—just like some steel manufacturers.”

“Another lesson is that U.S. consumers, both businesses and individuals, must pay a lot more in taxes or artificially high prices. That’s not making America great again, just more expensive—and a lot less competitive,” said Matthews.

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