Economic independence costly

This week, let’s put down our midsummer cookout plates long enough to remember sacrifices made across generations to secure independence, peace and prosperity. We might also reflect on how British trade interference with goods like stamps and tea helped spark the Fourth of July holiday.

As 2019’s trade wars drag on, perhaps you’ve noticed some signs of government interference while shopping for that cookout. Tariffs make government-favored products into winners, but overlooked products and those caught in the retaliation lose out.

The new patio furniture you’re sitting on? If it’s made in the U.S.A. out of steel or aluminum, then U.S. furniture makers, who likely took a hit from higher metal prices thanks to steel and aluminum tariffs, may have passed some of that cost on to you. Metals tariffs have raised prices across the board even for those manufacturers that do not import. If your picnic table or patio furniture was imported from China, it’s being slapped with 25% duties.

Hot dogs might wind up a little cheaper this year thanks to the trade slowdown. Mexico imposed a 20% duty on U.S. pork in response to our steel and aluminum tariffs, and China hiked its tariff on U.S. pork to 70%. The drop in trade led to a pile up of product, and as American businesses struggle to unload it, those commodity prices dropped. Consumer prices haven’t dropped much yet though.

Don’t forget the burgers. The quintessential grilling favorites come from an export-oriented agriculture sector caught in the trade war crossfire. While beef prices haven’t taken any sharp turns, ranchers are dealing with increasing turbulence. China lifted a ban on U.S. beef in 2017 only to slap on retaliatory tariffs a year later. For an industry already at the mercy of extreme weather, being shut out of markets and the uncertainty of what lies ahead are further blows.

If news from the front lines of the trade war is depressing, you can drown your sorrow in a can of beer. But popping it open won’t relieve the pressure that brewers are feeling from 10% tariffs that remain in place for aluminum imports from many countries.

“Aluminum tariffs are increasing brewers’ costs and are an anchor on a vibrant industry,” said Jim McGreevy, chief executive of the Beer Institute, an industry group. “Each brewer is deciding for themselves how to absorb that expense, whether it’s raising prices, laying off workers or delaying innovation and expansion.” A brewing industry study this year even partly blamed aluminum tariffs for the disappearance of 40,000 beer-related jobs since 2016.

A veggie burger, perhaps? Soybean-based burgers and hot dogs are the new wave of American food, and soy protein is common in chicken substitutes and popular dishes like veggie chili.

After the Trump administration started slapping tariffs on Chinese goods in early 2018, American farmers immediately found themselves in Beijing’s crosshairs through 25% retaliatory tariffs on soybeans. Overnight, $12 billion a year in exports collapsed, and the cash price plummeted.

“Soybean farmers like me are feeling the impacts of the tariff war, and they are unsure if they will be able to make it through another growing season,” Missouri farmer and American Soybean Association board member Ronnie Russell told a congressional committee June 19. He also noted, “The loss of the China market cannot be fully replaced.”

In fact, American farm exports are expected to drop by $1.9 billion in the 2019 fiscal year, according to Department of Agriculture chief economist Robert Johansson.

The uncertainty is taking a heavy toll. Farmers, still uncertain how things will play out, are delaying their equipment purchases. Deere & Co., the world’s largest tractor manufacturer, just cut the profit estimate for its agriculture division. CEO Samuel Allen pointed to customer concerns over tariffs and trade policies.

Plenty of Americans and businesses support the president’s approach to China, but just as many are worried that further tariffs will do more harm than good. The freedom to buy and sell as we please is an American founding principle. Future economic growth — and happy Independence Days for American businesses, farmers and the people they employ — depends on sticking to it.

Christine McDaniel is a senior research fellow with the Mercatus Center at George Mason University.