Tricks of the Trade

Brittany Ung and English 313

It’s 2016, late June. President Donald Trump walks onto an empty stage. Behind him are towering bales of used soda cans. Before him, an expectant crowd of workers at the aluminum recycling plant, plus thousands of other voters in the Western Pennsylvania city of Monessen (Politico). Trump’s gritty, stage-ready voice cuts through the night air as he describes the sorry state of American manufacturing, once a bedrock of the domestic economy, but now denuded by foreign suppliers who undercut domestic prices. “When subsidized foreign steel is dumped into our markets, threatening our factories, the politicians do nothing,” he proclaims. “For years, they watched on the sidelines as our jobs vanished and our communities were plunged into depression-level unemployment. Many of these areas have still never recovered.” This speech was one of many that established Trump’s “America First” trade strategy and won voters in 2016. This strategy emphasized the use of tariffs—specifically antidumping and countervailing duties—to protect domestic businesses from low-priced imports that steal jobs from hardworking Americans. But these publicly inconspicuous yet heavily relied upon weapons have been a net loss for the American economy; the poverty caused by antidumping and countervailing duties ripples throughout the American economy, yet goes unnoticed by both voters and politicians.

The definitions of antidumping and countervailing duties are not widespread; most news articles simply refer to them as tariffs or import taxes. An antidumping duty is actually a specific type of tariff that taxes imports that have been dumped, that is, sold below a fair price. Nations participate in dumping by undercutting the prices of goods they export, sometimes even selling products at a net loss to the company. This strategy can be effective if the foreign producer can sell enough to capture a significant portion of the market, or if the foreign government is willing to subsidize the industry and keep businesses afloat. If the United States’ International Trade Commission determines that a nation has been dumping goods, it levies an antidumping duty, or a countervailing duty if it finds the foreign nation has been subsidizing their goods. These taxes add to the price of dumped goods, bringing the price of imports back up to what the trade commission determines is fair value and allowing domestic producers to remain competitive.

Trade representatives of the past several administrations have leaned heavily on antidumping and countervailing tariffs to protect businesses from foreign imports. Former President Donald Trump campaigned on a platform of “America First,” promising to prioritize American manufacturers and accusing China of stealing American jobs. This campaign swayed American voters in 2016, and the then-president entered into a “trade war” with the Asian manufacturing juggernaut. Trump’s administration slapped high antidumping and countervailing duties on billions of dollars of imported solar panels, washing machines, steel, aluminum and other goods (Bown).

Since then, President Joe Biden’s administration has criticized the former president’s hard-line trade strategies, but kept many of the tariffs. As of October 29, 2021, the U.S. has 640 active antidumping and countervailing duties worldwide, many of them set at rates of 100 percent and higher (“Antidumping”). Biden has not made trade a major campaign issue, but in an October 2021 speech, Biden’s trade representative, Katherine Tai, said the administration would not rule out the use of tariffs. “Above all else, we must defend—to the hilt—our economic interests,” she said in the speech. “That means taking all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition” (Khalid). Trade remedies against unfair competition: in other words, antidumping duties. Tai, though decidedly less incendiary than Trump in personality and rhetoric, retains the former president’s proclivity for antidumping duties that raise the price of imports to keep domestic manufacturers competitive.

The increase in price caused by antidumping and countervailing duties, however, raises the cost of goods for consumers in the United States. Money spent to pay the import taxes goes to the government, meaning consumers have less money to spend at their local farmer’s market or at the movies—places that, unlike government fees, would return quality-of-life enhancing goods or services and stimulate domestic businesses. Whether consumers choose to buy the higher-priced American product, or the tariffed, imported product, the end result is the same: paying more. In 2018, the United States put antidumping tariffs on washing machines from China and South Korea and washing machine prices spiked 12 percent. The median price of washing machines increased by about $86 per unit (Fleisher). According to the Council on Foreign Relations, a 2019 study by researchers from the Federal Reserve and the University of Chicago found that consumers bore more than 100 percent of the costs of washing machine tariffs (Chatzky). Tariffs are paid by the importer—not the foreign exporter—so a tax on imports is really a tax paid by American buyers. With an antidumping duty, Americans are forced to spend more money for fewer goods.

Antidumping tariffs raise prices for consumers, but they also damage domestic businesses that use imported products. A domestic auto manufacturer that uses imported steel to create cars must now pay more, and either pass the increase in costs to the consumer, reduce wages, cut jobs or otherwise slow the growth of the business. Though the tariffs may save jobs in the steel industry, they cost jobs in the myriad other industries that use steel: construction, automobiles, tech and more.

This tradeoff has manifested itself repeatedly after American antidumping tariffs have been applied. In 2002, then-president George W. Bush’s administration applied steel tariffs as high as 30% on 14 types of steel (“U.S. Steel”) Prices skyrocketed by around 40%, and 200,000 jobs were lost in steel-consuming industries. A 2005 study found that each job saved by steel tariffs came at the cost of three jobs in steel-using industries and caused economic distortions equal to some $450,000 (Mankiw). The same happened in the magnesium industry, after 2004 antidumping tariffs against China were requested by the industry’s one magnesium producer, a Utah company with 370 employees. The tariffs eventually cost 1,675 jobs—more than five times the number of jobs that existed in the entire magnesium-producing industry (Ikenson). A 1991 study found that antidumping tariffs are a net loss to the American economy, costing $1.59 billion in GDP that year (Johnson). Lost jobs in steel or magnesium are not trivial. But saving them comes at a cost, and in many cases, that cost is greater than the reward.

Yet the senseless costs of antidumping tariffs go unrealized by the American public. Protecting American jobs seems like an important goal, but voters only see the jobs that were directly saved by tariffs, not the thousands more that were lost due to higher production costs. A 2019 Gallup poll found that 77 percent of respondents said it was very or somewhat important to establish tariffs to discourage companies from relocating U.S. operations to other countries (Saad). The Trump administration’s win in 2016 established that preserving domestic manufacturing was important to voters, and the Biden administration’s continued reliance on tariffs suggests that his presidency holds similar protectionist values.

The net losses caused by antidumping tariffs also go unrecognized by a key audience: the United States International Trade Commission, the agency that approves requests for antidumping tariffs. The trade commission is prevented by law from including the impact tariffs have on “downstream industries,” industries that use imported goods to produce other goods. The steelworkers’ union can—and often does—petition to the trade commission for tariffs to be applied, in light of low-priced foreign imports. Yet the auto union cannot come forward with a counter-argument that the tariff should not be applied, in light of the jobs that higher-priced steel would cost their industry—the law forbids it. The trade commission is statutorily barred from considering the economic impact antidumping restrictions have on those downstream companies, or on the economy at large (Ikenson). According to the Cato Institute, four out of every five U.S. antidumping measures restrict imports of things that other U.S. producers use to produce their goods. Yet, the harm caused by these tariffs is, by law, unappreciated by the nation’s governing trade body.

Patriotism—and perhaps a dash of wariness at other countries—makes voters and politicians instinctively seek ways to protect jobs in the most immediate and tangible ways possible. And antidumping duties are often the first policy tool they reach for; the logic behind these tariffs points to a discrete industry—names and faces and union reps—who have been victimized by insidious, faceless foreign businesses. But just as real are the stories of thousands of other Americans: parents who ride the bus to work because they couldn’t afford a car and homeless families who were looking forward to sleeping in an affordable housing unit, but the developer just backed out after the price of rebar skyrocketed. Their stories are barred from appearing before the trade commission—even if they weren’t, there would be no one to represent them; there’s no union that could possibly encapsulate the breadth of people affected. And though those stories might never appear in a press release or campaign speech or petition to the trade commission, they make a powerful argument against the use of protective antidumping duties, with evidence that’s ever present, but never seen. 

Works Cited

 

 

 

 

 

“ANTIDUMPING AND COUNTERVAILING DUTY ORDERS IN PLACE.” United States

International Trade Commission. Oct. 29, 2021. https://www.usitc.gov/trade_remedy/documents/orders.xls

This is where I got my hard numbers on the amount of AD/CVD duties we have. When I was still writing about China, it was helpful to see the number imposed on each country, but I ended up cutting that part. 

Bown, Chad P. and Melina Kolb. “Trump’s Trade War Timeline: An Up-to-Date Guide.”

Petersen Institute for International Economics. Oct. 4, 2021.

https://www.piie.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide.

This source helped me understand the development of the trade war. I knew there were generally some protectionist measures placed, but this article provided specific actions taken by both the United States and China.

Chatzky, Andrew and Anshu Siripurapu. “The Truth About Tariffs.” Council on Foreign

Relations. Oct. 8, 2021.  Https://Www.Cfr.Org/Backgrounder/Truth-About-Tariffs.

This source gave further insight on the washing machine tariffs in 2018, quoting studies about how consumers bore the cost of the taxes.

“Exports of goods and services from the United States from 1990 to 2019, as a percentage of

GDP.” Statista. June 29, 2021. https://www.statista.com/statistics/258779/us-exports-as-a-percentage-of-gdp/.

This helped me understand the percentage of our economy that exports make up. I wanted to emphasize the importance of domestic production, and dispel the myth that a trade deficit means buying more than we can afford.

Fleisher, Chris. “The spillover effects of trade wars.” American Economic Association. July 31,

2020. https://www.aeaweb.org/research/washing-machines-2018-tariffs-effect.

This gave me a specific and recent example of how tariffs increase prices for consumers.

Friedman, Milton and Rose Friedman. “The Case for Free Trade.” Hoover Digest. Oct. 30, 1997.

https://www.hoover.org/research/case-free-trade.

I just love how Friedman describes the emphasis on the consumer. I liked his rhetoric about consumers appreciating foreign goods, so I quoted him directly.

Ikenson, Daniel. “Economic Self‐​Flagellation: How U.S. Antidumping Policy Subverts the

National Export Initiative.” The Cato Institute. May 31, 2011.

https://www.cato.org/trade-policy-analysis/economic-self-flagellation-how-us-antidumping-policy-subverts-national-export

Ikenson had lots of great examples of the harm caused by antidumping laws in specific industries, like magnesium. He also wrote about the law preventing the ITC from considering all sides.

Johnson, Bryan and Robert O’Quinn. “Abolish America’s Costly Anti-dumping Laws.” The

Heritage Foundation. October 3, 1995

https://www.heritage.org/trade/report/abolish-americas-costly-anti-dumping-laws

Even though this is an older source, I liked that it summed the total cost of all antidumping laws. It might have been even more persuasive to convert $1.59 billion in 1995 to today’s dollars, but I didn’t want to confound the argument with explanations like that.

Khalid, Asma. “Biden is keeping key parts of Trump’s China trade policy. Here’s why.” National

Public Radio. Oct. 4, 2021. https://www.npr.org/2021/10/04/1043027789/biden-is-keeping-key-parts-of-trumps-china-trade-policy-heres-why

I got the quotes from Biden’s trade representative from here; it helped me understand what the Biden administration’s stance on trade is. 

Manak, Inu. “On China Trade Strategy, A Blast from the Past?” The Cato Institute. Oct. 6,

2021. https://www.cato.org/blog/china-trade-strategy-blast-past.

This article was very helpful in analyzing the Biden administration’s approach to trade. I knew a bit about 2016-era protectionism, but wasn’t sure if Biden would continue that approach. I looked at this source early on—if Biden reversed many of the past administration’s trade policies, my case that free trade was underappreciated would be weaker.

Mankiw, N. Gregory, and Phillip Swagel. “Antidumping: The Third Rail of Trade Policy.”

Foreign Affairs 84(4): 107-119. 2005. https://dash.harvard.edu/bitstream/handle/1/2961701/Mankiw_Antidumping.pdf?sequence=2

This is where I got my steel example from; these two are highly respected economists and I trust their economic analysis that says 1 job saved in steel leads to 3 jobs lost elsewhere. 

Saad, Lydia. “Americans’ Views On Trade In The Trump Era.” Gallup. Oct. 25, 2019.

Https://news.gallup.com/opinion/gallup/267770/americans-views-trade-trump-era.aspx.

This source helped me understand the current population’s views on trade. I got my statistics on support for protectionism here. Things may have changed since 2019, so I’d like to find a more recent source.

Trump, Donald. “Full transcript: Donald Trump’s jobs plan speech.” Politico. June 28, 2016.              https://www.politico.com/story/2016/06/full-transcript-trump-job-plan-speech-224891.

This transcript helped bring specificity to my understanding of the Trump administration’s trade policy. I knew there was a general “America First,” anti-Chinese trade bend to his trade policy, but I needed to know what specifically he said.

“U.S. Steel Users Claim Tariffs ‘Protect a Few at the Expense of the Majority’.”

[email protected] Feb. 12, 2003.

https://knowledge.wharton.upenn.edu/article/u-s-steel-users-claim-tariffs-protect-a-few-at-the-expense-of-the-majority/#

This gave me more background and information on the 2003 steel tariffs, and what their impact was on downstream industries.