Much Has Changed, But The Fundamental Principles Have Not

Much Has Changed, But The Fundamental Principles Have Not

As a consultant, I have opined on matters on which I should have just kept my mouth shut and listened. Spouting-Off Syndrome, speaking in an authoritative manner on things one knows little or nothing about, is a common affliction among consultants.

Those stricken with SOS feel compelled to be all knowing on subject matter that they somehow believe that they should know, whether they actually do or not. Bless their hearts.

With age and experience, I have come to realize that while I don’t have all the answers at the tip of my tongue, I do have a fiduciary responsibility to my clients to give them accurate information. That means listening to their concerns and finding the correct answers, so that they can make better informed decisions.

Lest one forget, opinions are one thing, facts are another. You will find the latter far more defensible.

For economic development clients, I have come to know through experience that there are various ways and means by which to improve a business climate of a community and increase the likelihood of corporate investment. For corporate clients, I have learned that a site selection process is an absolute necessity to identify best places from which to operate. The process truly is the solution.

But we do not live in a static world. Things and circumstances change. As one who is supposed to give expert advice, it is incumbent on me and my fellow team members at BBA to stay abreast of business news and industry trends. It’s never too late to learn.

Brilliant and Bonehead

Not long ago, I sat on a manufacturing panel of site selection consultants at an economic development conference in Dallas. In my opening remarks, I mentioned the reduction of the corporate tax rate from 35 percent to 21 percent was a huge boon to companies and would likely result in more capital investment.

I also said that the prospect of a trade war spawned by protectionist policies of the Trump administration was rightly a great concern for many, as it would increase production costs to manufacturers and consumer costs for the rest of us. I was not trying to be “political,” but merely stating facts.

But don’t you know that it just couldn’t lie there. Another consultant on the panel, who openly professed to being a Trump supporter, predicted there would be no trade war sparked by increased U.S. tariffs on imports from other countries.

I was dumbfounded by the comment, and thought to myself, “How on earth do you know that? Where are you getting your information?”

But I kept quiet, realizing that consultants are people, too, capable of saying brilliant and bonehead things within the same breath. SOS is a serious thing.

A Bad Day For All

The news breaking this past week -- the Trump administration is putting steel and aluminum tariffs on our closest neighbors and allies – reveals a growing rift that could stunt economic growth both here and abroad. Not surprising, Canada, Mexico and the European Union have promised to retaliate with duties of their own.

“Today is a bad day for world trade. We did everything to avoid this outcome," said EU Commissioner for Trade Cecilia Malmstr?m in a prepared statement. "The U.S. has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU. This is not the way we do business."

Ms. Malmstr?m called the U.S. tariffs “illegal” and said the EU will take its case to the World Trade Organization. In the meantime, the EU issued a 10-page list of retaliatory tariffs on U.S. goods ranging from Harley-Davidson motorcycles to bourbon.

Our Closest Neighbors Respond

Canadian Prime Minister Justin Trudeau called the U.S. actions "totally unacceptable."

"These tariffs are an affront to the longstanding security partnership between Canada and the United States and, in particular, an affront to the thousands of Canadians who have fought and died alongside their American brothers in arms," Trudeau said.

Canada, the largest supplier of steel to the United States, said it will impose tariffs covering C$16.6 billion ($12.8 billion) on U.S. imports, including whiskey, orange juice, steel, aluminum and other products.

"We need to hit Trump where it hurts — in his wallet,” said Ontario Premier Kathleen Wynne. “This short-sighted decision is an attack on Ontario's steel industry and its workers. It is not the action of a friend, an ally or economic partner."

Mexico, another top exporter of steel to the U.S., said it would retaliate with its own “equivalent” penalties on U.S. products including pork, apples, grapes, cheese, steel and other goods. The government said its countermeasures would remain in place until the U.S. removes the tariffs.

"Mexico reiterates its openness to constructive dialogue with the United States, its support for the international system of commerce, and its rejection to unilateral protectionist measures," according to a prepared statement.

U.S. Against The World

Taken together, the responses of the EU, Canada and Mexico would appear to be more than bluster, but real retaliatory measures that they are prepared to take in response to the U.S. firing the first salvos of what could be an ugly trade war.

That is not to say that a trade war is inevitable. Reason can still prevail. The Trump administration could back away from the tariffs. But right now, it looks as though the U.S. has isolated itself from the rest of the world.

"This doesn't happen that often at G7 meetings, but it was U.S. against everyone else," Japanese Finance Minister Taro Aso told reporters. Japan has been paying the U.S. metals tariffs since March 23.

Richard Haas, president of the Council of Foreign Relations, tweeted: "The Trump administration has achieved the unthinkable: turning the G-7 into the G-6 ... with the US as the odd man out."

Mr. Trump contends that the newly enacted tariffs are a win for the steel and aluminum industries, with investment and hiring to follow. But history teaches us that tariffs have been largely ineffective in protecting jobs.

Truth and Consequences

The truth is that there are many more communities in this country that depend on industries that use steel or aluminum than on the industries that actually make those primary metals. In short, there are local consequences to state and national policy, something that economic developers know full well.

For every job producing steel or aluminum that is protected, there are many more (100 or more) at risk in the industries that use steel and aluminum as tariffs push up the prices of these metals, according to research from the Brookings Institution.

In short, tariffs meant to protect some businesses, ultimately damage others. And it has always been that way.

We’ve Seen this Movie Before

I do not mean to be an alarmist, but this is the third blog that I have written in recent months concerning the Trump administration’s protectionist policies.

Back on March 5, soon after the administration floated the idea of enacting steel and aluminum tariffs, I reported the president saying, “trade wars are good and easy to win.” I also reported that Electrolux, Europe's largest home appliance maker, would hold off on a planned $250 million investment in Tennessee in response.

On April 8, in a blog entitled, “A Story to Remember,” I wrote about how the farm crisis of the 1920s resulted in the Tariff Act of 1930 (commonly referred to as Smoot-Hawley), which increased duties on both agricultural and industrial goods.

Then as today, it was the U.S. taking the first shot. And it was Canada, our most loyal trading partner, being the first to respond with retaliatory measures. And it snowballed from there with world trade collapsing.

We’ve seen this movie before. It was a horror show.

Never Too Late, Mr. President

Back in 1930, 1,028 economists signed a letter written to President Herbert Hoover, urging him to veto Smoot Hawley. Last month, 1,100 economists signed a letter to President Trump, urging him to abandon his tariff-heavy approach to trade. The recent letter quoted many of the same passages from the 1930 letter at the start of what became the Great Depression.

 â€œMuch has changed since 1930 -- for example, trade is now significantly more important to our economy -- but the fundamental economic principles as explained at the time have not.”

Mr. President, with all due respect, please read both letters. It is never too late to listen and learn.

Dean Barber is the principal of Barber Business Advisors, LLC, an economic development and corporate location consulting firm based in Dallas. Dean is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at www.barberadvisors.com to learn more.

Brad Evanson

Senior Planning Management Professional -- Municipal/Consulting/Real Estate Development

6 å¹´

Excellent analysis. So far, much of Trump’s actions and decisions are explained (by the administration) as steps in the negotiation process. That he is doing what he does best...negotiating a deal. While that may be (his actions vis a vis North Korea so far seem to be working, Iran less so and will the latter impact the former?) an issue like international trade where it literally is “me against the world” involves walking a very fine line to not push the other side so far that the deal is unreachable (like Iran seems to be heading toward). And while the G7 meetings don’t sound as though a positive outcome is likely, let’s hope that both sides remain open to continuing talks and considering compromise. Short of one party literally and figuratively having a knife to the throat of the other, isn’t that how negotiations are supposed to work?

赞
回复

Since WWII the US has allowed other countries to levy goods o US imports. Over the years, layer after layer of these tariffs. This was allowed so the world could recover from the devastation of a world war or to gain favor with Cold War allies. Now the trading system is completely imbalanced and I believe the administration’s state goal is free trade but these foreign tariffs must be eliminated and playing field must be leveled. The threat is: we will charge tariffs equal to what you place on US goods. Fortunately,this is mostly a hype about a trade war that is very unlikely to actually occur. Just watch and see what happens over the next 6-months.

Stephen Slater

CEO, Blu Croix Ltd. - Due Diligence | Site Selection | Land Use Entitlements | Permits

6 å¹´

The tax code revision, actually will hurt many small corporations.? It is important to note that the first 50k of profit was taxed at 15%, now all profit is taxed at 21%.? Thus, a small corporation needs to hit about $80k in profit to be in a better situation tax wise than previously.? ?This point means nothing to Apple, GM, Google, Starbucks, Amazon, etc.? but it does mean a great deal to thousands of small corporations (micro perhaps), that will ultimately pay more in corporate tax on their first +/- 80k in profit....? ?This element of the code helps big business, hurts small business ...? why is that never in the news ?? ? ?

赞
回复

Ronald Reagan warned us about this: “We should beware of the demagogues who are willing to declare a trade war against our friends, weakening our economy, our national security, and the entire free world, all while cynically waving the American flag."

David Bernd

Senior Vice President Business Development and Strategy at Premier Petroleum Inc - Retired

6 å¹´

Imagine if this was reversed: “A trade deficit occurs when a nation imports more than it exports. For instance, in 2016 the United States exported $2.2 trillion in goods and services while it imported $2.7 trillion, leaving a trade deficit of roughly $500 billion” “The fundamental cause of a trade deficit is an imbalance between a country’s savings and investment rates. As Harvard’s Martin Feldstein explains, the reason for the deficit can be boiled down to the United States as a whole spending more money than it makes, which results in a current account deficit. That additional spending must, by definition, go toward foreign goods and services. Financing that spending happens in the form of either borrowing from foreign lenders (which adds to the U.S. national debt) or foreign investing in U.S. assets and businesses—the capital account”

赞
回复

要查看或添加评论,请登录

Dean Barber的更多文章

  • Mexico Faces Trade Reckoning as Trump’s Tariffs Upend Decades of Economic Integration

    Mexico Faces Trade Reckoning as Trump’s Tariffs Upend Decades of Economic Integration

    At 12:01 a.m.

    2 条评论
  • This Week With Dean Barber

    This Week With Dean Barber

    The Rising Tide: America’s Economy is Thriving, But What About Its People? The U.S.

  • This Week With Dean Barber

    This Week With Dean Barber

    The Rising Tide: Trump’s Tariff Gambit and the Economic Fallout Tariffs have long been a tool of U.S.

  • This Week With Dean Barber

    This Week With Dean Barber

    The Rising Tide: The World According to Trump In this week’s edition, we examine how Donald Trump’s return to the…

  • This Week With Dean Barber

    This Week With Dean Barber

    The Rising Tide: Insurance Crisis Escalates as Natural Disasters Impact Homeowners In this week's edition of The Rising…

  • America's Tectonic Shifts in 2024: A special free holiday edition of The Rising Tide

    America's Tectonic Shifts in 2024: A special free holiday edition of The Rising Tide

    In 2024, America witnessed tectonic shifts in politics, society, and technology that are set to reshape the nation for…

  • This Week With Dean Barber

    This Week With Dean Barber

    The Rising Tide: Can Trump Steer America’s Economic Success? In this week’s lead story, we explore the dynamics of a…

    1 条评论
  • This Week with Dean Barber

    This Week with Dean Barber

    Thank you for following us on LinkedIn. Please note that you're only receiving a snippet of our newsletter here.

  • This Week with Dean Barber

    This Week with Dean Barber

    The Rising Tide AI's Power Hunger: Data Centers Are Becoming Energy GiantsThe surging demands of artificial…

  • This Week in The Rising Tide and Barber's Mexico Business Report

    This Week in The Rising Tide and Barber's Mexico Business Report

    Here's a recap (summarization) of what we published in The Rising Tide on Sunday and Barber's Mexico Business Report on…

    3 条评论

社区洞察

其他会员也浏览了