AAR, ACC, API to Trump: Kill the tariffs—before they kill us

Written by William C. Vantuono, Editor-in-Chief
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Tom Pennington/Getty Images

In July 11, 2018 commentary published in the Washington Examiner, AAR President and CEO Ed Hamberger teamed with American Chemistry Council President and CEO Cal Dooley and American Petroleum Institute President and CEO Jack Gerard to point out the inherent folly of President Donald Trump’s planned imposition of tariffs on steel and aluminum, which would almost certainly cause a simmering trade war with vital economic partners to boil out of control, killing jobs and flushing U.S. economic security into the sewer.

“The leaders of three of the nation’s most vital industry organizationswhich are sometimes at odds on various federal policiescame together to rebuke trade policy emerging from Washington that hinders global commerce,” the AAR, ACC and API leaders jointly said. “America’s energy, manufacturing and transportation industries are prime examples of the collateral damage threatened by Trump’s steel and aluminum tariffs.”

“These materials are critical to every aspect of our operations: building equipment and infrastructure to produce, refine and transport natural gas and oil; manufacturing parts and machines that produce everything from household plastics and automotive parts to waxes and chemicals that touch the daily lives of every household and business; and filling the freight railcars that serve as a nationwide steel delivery network,” the trio said. “In many cases, the specialty steel and aluminum components our industries need are simply not produced in the U.S. Our industries generate growth and savings that directly benefit U.S. households and small businesses. Fortified by free trade and fueled by the American energy revolution, these sectors support millions of jobs in the U.S. and across an array of industries. Tariffs put those benefits at risk.”

Following is the full commentary:

A trade war threatens the U.S. economy

Taxpayers and businesses alike celebrated in President Trump’s first year when he reformed regulations and signed a major tax cut—all designed to spur a new era of prosperity and growth for the U.S. economy.

That was then. The President’s more recent trade decisions could reverse that tremendous progress, adding hundreds of billions of dollars in potential costs for American businesses—costs that could ultimately be borne by consumers.

America’s energy, manufacturing and transportation industries are prime examples of the collateral damage threatened by Trump’s steel and aluminum tariffs. These materials are critical to every aspect of our operations: building equipment and infrastructure to produce, refine and transport natural gas and oil; manufacturing parts and machines that produce everything from household plastics and automotive parts to waxes and chemicals that touch the daily lives of every household and business; and filling the freight rail cars that serve as a nationwide steel delivery network.

In many cases, the specialty steel and aluminum components our industries need are simply not produced in the United States.

Our industries generate growth and savings that directly benefit U.S. households and small businesses. Fortified by free trade and fueled by the American energy revolution, these sectors support millions of jobs in the U.S. and across an array of industries.

Tariffs put those benefits at risk.

The examples are endless, but here are just a few:

Since 2010, more than $194 billion of new chemical industry investment has been announced. Steel tariffs threaten around half of that—jeopardizing construction on job-creating projects because companies cannot procure the products they need in sufficient time. Steel tariffs also hurt America’s railroads, with 140,000 miles that make up a steel network across the nation.

Pre-tariffs, the private sector was poised to invest $1.34 trillion in energy infrastructure to keep pace with surging production—supporting more than one million jobs each year on average through 2035. Tariffs could stifle hundreds of billions of dollars’ worth of projects—including new pipeline infrastructure needed to get oil and natural gas from the prolific Permian Basin to markets. The steel tariffs alone could increase the cost of a 280-mile pipeline by as much as $76 million.

Then there are the retaliatory tariffs on U.S. exports that China and other countries could impose.

Crude oil, liquid propane and other non-finished products that are the feedstock of petrochemicals and that fuel locomotives are also impacted by the tariffs. Railroads, which move these goods alongside trucks, would feel the pain, too.

China is threatening to retaliate against U.S.-made chemical exports valued at $5.4 billion. China’s tariffs will hit the U.S. chemical industry not once, but twice by closing China’s market both to chemical exports and exports of finished products using chemicals in their production, including agricultural goods and automobiles. The tariffs on downstream products could lead to less demand for those products and therefore less demand for U.S.-made chemicals.

Against the backdrop of the escalating tariff fallout, stalled efforts to renegotiate the North American Free Trade Agreement point toward even more trouble ahead.

Free trade among the U.S., Canada and Mexico under NAFTA helps support more than 10 million jobs here at home, and the agreement is at the center of a vital supply chain. Our three industries provide just a snapshot of the complex whole, but it’s an instructive snapshot to understand the stakes.

The rail industry supports 1.5 million jobs, one-third of which depend directly on international trade. Bolstered by NAFTA, international trade accounted for $26.4 billion of freight train revenue and 511 million tons of rail traffic in 2014. North America’s energy markets are integrated and interdependent—trading crude oil, natural gas and refined products between the U.S., Canada and Mexico.

Manufacturing components may cross the border as many as seven or eight times, often via railroads, before a final product is complete. Without agreements like NAFTA, tariffs would be levied multiple times, with the vastly more expensive materials potentially leading to higher price tags for consumers.

While we respect the Administration’s vision for U.S. energy and manufacturing dominance, we also know when U.S. trade policy is bad for business and a threat to our economic security.

That’s why our organizations—the American Petroleum Institute, the Association of American Railroads, and the American Chemistry Council—joined a range of industries to support legislation introduced by Sen. Corker (Robert P. Corker Jr., R-Tenn.) to re-examine tariffs. By requiring the President to sit down with fellow elected leaders and consider a full range of trade solutions, the bill is intended to infuse more dialogue into the President’s decision-making and ensure the best possible outcome is achieved.

Right now, the White House has a critical opportunity to avoid years of damaging impacts to American businesses and consumers by undoing these serious tariff missteps. It’s already clear that this well-intentioned policy will actually make the United States less competitive, undermine this Administration’s vision of energy dominance and the manufacturing renaissance, and almost certainly destroy many more jobs than it protects.

By acting quickly and decisively, the Trump Administration can stop a harmful policy before the full impact hits. The economic consequences are as damaging as they are foreseeable. Now is the time to change course.

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