The President escalated his trade rhetoric on Tuesday morning, this time directing his ire at Harley Davidson. The iconic American motorcycle maker announced on Monday that it was moving some of its manufacturing out of the U.S. as a result of a new European tariff meant to retaliate against the Trump administration’s recent actions. The E.U.’s tariff on American-made motorcycles is set to increase from 6% to 31%, which will raise the price of each exported bike by an average of $2,200.
UMD Diamondback: Kyle Rempfer cites history to understand the dangers of an impending trade war.
• After Congress’ Smoot-Hawley Act “laid a tariff on all countries importing goods into the United States” as an attempt to remedy the Great Depression, “the end result was a fall in international trade by more than 60 percent.”
• “It's important to remember that trade isn't a zero-sum game.”
• “Starting a trade war that could escalate into a recession isn't a smart move for our economy. It puts the market in flux and makes countries desperate for a way out.”
University of Wisconsin Badger Herald: Eric Hilkert explores “the larger socio-economic issue” driving President Trump’s “America first” agenda, “the demise of the blue-collar worker.”
• “Construction jobs still have not recovered from the burst of the housing bubble. States with a higher percentage of blue collar workers have seen slower job growth since 2000.”
• “The takeaway is clear: Labor jobs are slowly going extinct in the states.”
• “The decline in the American manufacturing industry is more complex, with two factors — outsourcing and automation — playing competing roles.”
• “A singular solution to America’s trade and industry woes may not be clear, but short-term fixes that transport our country’s economy into the past are certainly not the solution.”
UConn Daily Campus: Luke Hajdasz interviews Francis Ahking, an Associate Professor of Economics, regarding a prospective trade war.
• “There is no way that what President Trump wants is going to happen,” Ahking said. “We are never, ever going to bring back manufacturing (back) to the United States - it’s not going to happen."
• “We lost the comparative advantage which is what President Trump is unhappy about. In the way that the trade is set up, especially with China.”
The Bottom Line:
Although Harley Davidson has drawn the President’s immediate attention, it seems unlikely that it will be the only American manufacturer to outsource operations as a result of ever-increasing trade barriers. Trade remains the primary point of contention between an increasingly protectionist U.S. and the E.U., where pro-trade leaders like Angela Merkel and Emmanuel Macron are themselves struggling to respond to bottom-up nativist pressures.