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Miller Hudson

It seems Americans can no longer conduct reasoned public debate of economic issues. Recent price inflation is a case in point. Yes, President Biden’s approval ratings have slipped while consumer staples have grown more expensive. This correlation, as any statistics textbook will tell you, does not imply causation. The United States is hardly alone in facing inflationary pressure. October’s 6%, year-over-year increase, pales by comparison with Turkey’s 20%. Inflation may be contributing to Biden’s slide in opinion polls, but there are plenty of other factors at work.

The recently departed resident in the White House warned voters Joe Biden’s election would plunge the American economy into a depression that would make the 1930s look like a picnic. Instead, the stock market has climbed to record highs, we’ve created more new jobs in the past nine months than the former administration generated in four years. So, the sky is not falling. And there are several explanations for rising prices, which reflect varying degrees of plausible causation. COVID disruptions have clearly triggered the supply chain gridlock that is generating artificial shortages. Several OPEC members have chosen for entirely selfish reasons to choke off oil production as a strategy for recovering from nearly a decade of depressed energy markets. No reason to let a planetary crisis go to waste.

Closer to Main Street, many small family businesses are also pushing their profit margins up in order to amortize losses and loans incurred during the pandemic. There are also structural costs placed on markets we shouldn’t overlook. The Trump administration binged on tariff hikes across the entire economy, using executive orders premised on the dubious proposition that American national security was at risk. These tariffs amount to a retail tax on imports, in the case of Chinese goods it was set at 19%. The Chinese slapped a retaliatory 21% tariff on American imports. Only recently have these costs started to find their way to store shelves. Despite this, we are buying more goods than ever from China ($370 billion last year), while China is struggling to meet its commitment to purchase $200 billion in American exports. (Remember when we were told trade wars “…are easy to win.”)

Many of the Trump tariffs never made much sense. Take the Section 232 levies on imported steel and aluminum. Two dozen business organizations, including the Business Roundtable, the Foreign Trade Council and the National Retail Federation have asked the Biden White House to roll them back. In the case of aluminum, American producers can only meet 20% of annual U. S. demand. The bulk of the remaining 80% has been provided by our allies, who rely on American orders in competition with China which has a history of periodically dumping its excess inventory onto the market. This is doubly troubling since Chinese aluminum has a high carbon footprint in comparison with Canadian, European and Russian providers.

The added tariff burden works its way into everything from beer cans for Colorado’s craft brewers to equipment frames at cloud computing server farms. Republican Sen. Pat Toomey of Pennsylvania and Democrat Mark Warner of Virginia have introduced a bill that will require future Presidents to submit any executive branch claims of national security tariff imperatives for legislative review and approval by Congress. The European Union is committed to developing a more robust internal aluminum recycling program and partnering with U. S. producers to deploy cleaner smelting technologies. The U. S. aluminum industry successfully reduced its emissions by 62% per ton since 1992. Promising initiatives may make aluminum the first industrial metal whose manufacture could achieve carbon neutrality. The current combination of tariffs and shortages have driven up the price of a ton of aluminum by 75% since 2019, with no ceiling in sight.

Secretary of the Treasury Janet Yellen has testified that ratcheting down unnecessary trade wars could significantly tamp down current inflation. The President appears to agree. Tariffs have done little to help the U. S. aluminum industry, which has seen eight smelters shut down since 2014. Domestic production is now at an 80-year low as a proportion of actual demand. Removing the Trump tariffs would allow partnerships with key American allies to develop the low-carbon processes that would reduce climate warming and help us meet COP26 greenhouse gas (GHG) reduction targets. Barriers to cooperation in achieving technology breakthroughs can be removed with a stroke of the President’s pen.

Miller Hudson is a public affairs consultant and a former Colorado legislator.