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Trump’s Tariffs are a Tax Hike and American Manufacturers Will Pay the Highest Price

Every day, it seems a new dart gets thrown at the target that is global trade, and one too many could start to see things falter further.

In the last couple of weeks, President Trump has imposed 25 percent duties on steel and 10 percent duties on aluminum for countries except Canada and Mexico, and alluded to potential intellectual property related tariffs on imports from China—which could prove detrimental to the U.S. apparel and footwear industries.

Separate from tariffs alone, Trump has been stoking the trade war fire, upsetting long standing U.S. trade partners and engendering stern warnings from the World Trade Organization.

Outlining a plan on Tuesday for the way things in trade should go, Senate Finance Committee Chairman Orrin Hatch (R-Utah), said a positive trade agenda should focus on three key themes: opening new markets to boost export opportunities, targeting bad actors in global trade with existing trade tools, and protecting American ingenuity with strong patent and regulatory data protections.

What a positive trade agenda shouldn’t involve, is the U.S. doing harm to itself.

“To preserve the international trading system that America has worked for decades to establish and maintain, we must address foreign challenges directly. At the same time, we cannot exacerbate these challenges with self-inflicted harm,” said Hatch, who has been vocal about his disagreement with Trump’s tariffs.

Focusing on this trio of trade efforts is something Congress would be able to get behind, and it’s also something Hatch said would leave businesses in charge of their own best interests.

Highlighting the so far positive effects of the tax reform, Hatch said companies have announced plans to create new jobs, raise wages and bring billions of offshore earnings back stateside. But the celebrations could be short lived.

“All of these events are the direct result of tax reform. And they all signal good news for our nation’s economy,” Hatch said. “But let’s be clear: the gains could be squandered by bad policy decisions.”

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He continued, “I have been in the Senate for 42 years, and this is one of the most challenging environments for U.S. trade that I’ve seen. When it comes to trade policy, we’re all seeing the dangerous pitfalls that are currently in our path. They threaten to undermine and undo our recent success.”

Free trade and open markets have long been the United States’ M.O., and Hatch said he doesn’t intend to abandon that ethos.

China, admittedly, is one of the United States’ biggest challenges in trade, and its overcapacity of steel and aluminum, violation of intellectual property rights and use of its regulatory system to restrict U.S. exports, are certainly among the things that have garnered President Trump’s ire.

But, as Hatch acknowledged, China isn’t the United States’ only problem, and tariffs aren’t the only answer.

“To be clear, no one should doubt that Chinese steel and aluminum overcapacity has harmed U.S. companies and workers. But, to put it bluntly, the global tariffs set to take effect on Friday will do absolutely nothing to address that problem,” Hatch said. “Chinese companies don’t pay U.S. tariffs. Rather, American companies and American consumers get the bill. That is a tax hike, pure and simple.”

Policies that dictate where American manufacturers should source their imports and raw materials run counter to free market principles and are in direct contradiction with the Trump Administration’s efforts to reduce government regulation, Hatch said.

“At the end of the day, there is little difference between burdensome tariffs and suffocating regulations—both are unnecessary government intrusions into our economy and unjustified burdens on U.S. job creators,” he continued. “Meanwhile, China is not being incentivized to reform its steel and aluminum policies. So, if this is the start of a trade war, the only casualties thus far appear to be American manufacturers, American farmers and ranchers, American families and America’s allies.”

To remedy the impending derailment, the first step in Hatch’s positive trade agenda is to open new markets.

“The president is right that, too often, U.S. exporters face high tariffs and non-tariff barriers in foreign markets. However, since 1934, Congress has recognized that the solution is NOT to raise taxes on Americans through higher U.S. tariffs. Instead, the solution is to work to lower other countries’ barriers to American products and services,” Hatch said.

Opening new markets should involve negotiating more trade agreements in Asia-Pacific in particular, as that’s where U.S. manufacturers will be at an increasing disadvantage to competitors from Europe, Japan, Australia, Canada and Mexico. With each of those competitors, with the exception of the EU, part of the recently signed TPP (now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP) that has moved forward without the U.S., Hatch said he’d be in support of the U.S. rejoining the agreement. Without U.S. involvement in the trade deal, many say Asia takes an stronger foothold as the leader in free trade.

The second step in the three-part plan, according to Hatch, is to target specific practices by bad trade players using tools the U.S. already has.

China’s overcapacity can be targeted with greater enforcement of antidumping and countervailing duty laws, and Section 301 can still be used to target the country’s intellectual property issues—but not its overall exports.

“Any actions that the administration intends to take under Section 301, whether aimed at China or elsewhere, must be narrowly targeted at the source of the problem and with an objective to bring about a positive resolution—and NOT for the purpose of erecting trade barriers.”

The third and last step in Hatch’s trade plan, is to protect U.S. creators and innovators with strengthened copyright laws and reduced barriers to trade in digital services, like burdensome localization laws and privacy regulations that impair the flow of data between the U.S. and other countries.

This, according to Hatch, is the way to defend U.S. interests in trade. Not so much what Trump appears to have planned.

“When the president is right, I will continue to be his strongest supporter,” Hatch said. “When he is wrong, I will make my position clear and do my best to persuade him to correct course.”