Opinion | Paul Olson: Free trade and free markets are good for you and America

Paul Olson

New Ford Transit Connect vans made in Spain are shipped to U.S. ports where a 2.5% tariff is charged on their value. Then workers strip out all the rear seats and seatbelts and patch the holes so the vehicles can be sold as work vans. Why? Because if the vans were imported into the U.S. as work vans with no rear seats, the tariff would be 25%. This puzzling tax on light trucks and work vans has been in place since 1964 and was imposed in retaliation for Germany’s tax on U.S. chicken. The tariff on chicken is long gone, but political pressure from the auto industry has kept the truck and work van import tax in place for 58 years.

From 1790 until 1862, over 85% of federal revenue came from taxes on imports. In the late 1800s, powerful interest groups such as steel and wool producers were behind many of the tariff bills that were aimed at blocking foreign competition from the U.S. market. Later Congress got carried away with steep tariffs and protectionism with the 1930 Smoot-Hawley Bill which resulted in a poorly timed international trade war during the Great Depression. The Constitution only gives Congress the power to impose tariffs and other taxes, but Congress has ceded far too much of the power over trade policy to presidents over the past 100 years.

A tariff is a tax paid by importers at our border, the cost of which is often passed along to consumers. The average tariff rate on all U.S. imports was only 1.66% in 2017. Our low tariff rates benefit all U.S. consumers by keeping prices low, increasing buying choices and encouraging businesses to cooperate across international borders. In 2019, the average tariff rate on all imports jumped to 13.78% because of executive orders by President Donald Trump that put high tariffs on steel, aluminum, washing machines, solar panels, and many other products. China, the European Union and Canada all retaliated with tariffs on U.S. exports.

The purpose of these new tariffs may have been to force better trade deals and to protect select industries, but the actual result was money leaving your pocket. The American Action Forum estimates that new U.S. tariffs and the retaliatory tariffs imposed by other countries increased U.S. consumer costs by $57 billion. According to the USDA, the retaliatory tariffs imposed on U.S. farm exports cost our agriculture industry $27 billion from mid-2018 through 2019. Besides raising prices for Americans, this trade war has created unnecessary friction between the U.S and many other nations. Free trade between countries is a great contributor to a peaceful world.

Would you prefer to buy a television made in China for $1,000 or an American-manufactured one for $2,000? This is actually a trick question since there are no TVs made in the U.S., other than specialty outdoor and mirror TVs, according to the Federal Trade Commission’s definition for claiming “Made in the USA.” There used to be dozens of American companies making TVs in the 1950s, but competition, innovation and lower costs overseas have worked to the advantage of U.S. consumers so that a TV now costs about a third of what it cost in 1980 (adjusted for inflation) with the bonus of TVs now weighing less and having a sharper picture.

Consumer products made in China support millions of American retail jobs, and China is a key supplier of components that are needed by U.S. manufacturers. China is our third largest export market, buying $151 billion in goods and services in 2021 — primarily motor vehicles, business and financial services, construction equipment, semiconductors, and grain.

Many people think of exports as only manufactured goods or commodities, but 35% of U.S. exports in 2019 were for services. Summit County businesses engage in international service trade when a visitor coming here from Germany rents a condo or a tourist from Great Britain gets altitude sickness and is treated at a local clinic. A Summit County architect designing an office building in Toronto is exporting a service. Thankfully no politicians are pushing for tariffs on these exports.

Politicians often complain about our trade deficit, but the fact that American consumers have plenty of money they wish to spend on nice things made overseas is not especially a bad thing. The U.S. has had an average annual trade deficit of $535 billion since 2000 while still having a growing economy, low unemployment and a strong dollar. Politicians are keen on propping up struggling industries with no regard for the economic value to taxpayers. The Trump tariffs on steel imports cost U.S. consumers $900,000 per year for every steel job saved according to the Peterson Institution for International Economics — a very bad deal all around.

Businesses in Summit County and all across the U.S. make decisions each day about how to best take care of their customers and be successful. A surprise from the government such as a new tariff can significantly disrupt the economy and result in lost jobs, lower profits, and higher consumer prices. America had an impressive $2.5 trillion in exports in 2021 because of our nation’s many competitive advantages such as superior universities, a well-educated, flexible workforce, innovative businesses and healthy financial markets. Let’s encourage our elected representatives to minimize government intervention in our prosperous free-market economy.

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