Understanding the Issues: Federal Trade and Tariffs
In early 2018, the Trump Administration began imposing tariffs on a number of foreign goods and products in response to perceived trade deficits and unfair trading practices by foreign nations. The economies of Oklahoma and the United States as a whole are extremely dependent upon foreign trade, and the threats of retaliatory actions by foreign trading partners have the potential to slow or inhibit economic growth.
Recent Changes to Federal Trade Policy
Reevaluating the United States’ policy regarding foreign trade has been a central component of President Trump’s foreign policy agenda since he first announced his candidacy. Beginning in early 2018, the Administration has rolled out tariffs on $85 billion of foreign imports, primarily from China. Products that have been targeted for tariffs include steel and aluminum, washing machines, and solar panels. President Trump has threatened further tariffs on over $200 billion of foreign goods including automobiles, uranium, and consumer products mostly produced in China.
The President plans to utilize tariffs as a negotiating tool with foreign trading partners in order to reorganize trade agreements, reduce trade deficits with key partners, and limit trade manipulation by foreign countries. In the meantime, the federal government has implemented plans to distribute $12 billion in aid to farmers affected by tariffs and has not ruled out creating similar arrangements for other industries.
In response to U.S. imposed import duties, foreign trade partners including the European Union, Canada, Mexico, and China have imposed retaliatory tariffs on U.S. produced goods. Agricultural products exported to China have been the main victim of retaliatory tariffs thus far, but manufactured goods, chemicals, and consumer goods have been targeted as well.
Although trade has not been a major topic of discussion in Oklahoma in recent years, new economic policies instituted by the Trump Administration are beginning to impact Oklahoma businesses that rely on trade and exports for their business. In a recent poll conducted by the State Chamber of Oklahoma, approximately 57% of members oppose the Administration’s trade strategy and about 65% of members believe tariffs will impact their business.
Tariffs imposed both by the U.S. and foreign trading partners have the potential to increase the cost on consumer goods purchased in Oklahoma. For example, imposing a threatened 25% tariff on auto imports could result in an average price increase of $6,400 on a $30,000 car sold in the United States. If tariffs result in increased costs of consumer goods over a sustained period, consumer confidence may decrease, hurting the economy in a wide variety of sectors.
Particularly threatened industries in Oklahoma include agriculture and ranching, machinery manufacturing, and transportation equipment manufacturing. In the agricultural sector, Oklahoma soybean, beef, pork, and wheat exports worth over $800 million annually are threatened by Chinese tariffs.
Some important facts to keep in mind:
401,000 Oklahoma jobs are supported by trade with foreign nations
$5.4 billion in goods are exported from Oklahoma annually
$9.7 billion in goods are imported to Oklahoma annually
What’s Coming Next?
Congress and the President determine trade policies for the United States, including free trade agreements and tariffs. The federal government can work together to stabilize U.S. trade policy—which would benefit businesses that rely on trade—while still accomplishing the Administration’s goal of rewriting and modernizing U.S. trade agreements. Congress and the President have a duty to ensure that the United States’ interests are protected in their dealings with foreign nations while still ensuring that domestic businesses are able to thrive in today’s global marketplace.