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.
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.
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.
Many of the Trump tariffs never made much sense. Take the 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 dumping its excess inventory onto the market.
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 combination of tariffs and shortages have driven up aluminum prices by 75% since 2019, with no ceiling in sight.
Treasury Secretary Janet Yellen has testified ratcheting down unnecessary trade wars could significantly tamp down inflation. Removing 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 reduction targets. Barriers to cooperation in technology breakthroughs can be removed with a stroke of the president’s pen.