Keating: Tariffs and Their Exemptions
by Maryann O. Keating, Ph.D.
Over the Christmas holidays while entertaining house guests, our 20-year-old stove malfunctioned destroying the main circuit breaker and plunging the house into cold and darkness.
Replacing our Sears Kenmore stove is no longer an option, and, to avoid remodeling kitchen space, we realized that we would have to pay a fairly high price for a non-standard size range. Unfortunately, we found that an American-made replacement exceeded what we were willing to pay by about $2,000. Several international brands were available but for $1,000 above the amount we planned to pay.
A recent article in the Wall Street Journal relates to our experience (“I Support Trump’s Tariffs but Need an Exemption,” Jan., 7, 2020). Since the recent imposition of a 25 percent tariff on imported steel, the U.S. has experienced increases in overall steel production and employment. However, U.S. producers of certain kitchen appliances and car parts require nickel-bearing stainless steel slabs. These specific steel products are still produced domestically.
However, they are available only at a price significantly higher than imports from countries in which steel is not subject to tariffs or is actually subsidized. Therefore, U.S. domestic producers of appliances face increasing costs for inputs and for that reason request exemptions for certain categories of steel imports.
Given the opportunity, I would gladly inform President Donald Trump how his broad-based tariffs, which may be in the national interest, have affected the price of our new stove. However, I would also strongly suggest that, before making categorical exemptions to the tariff schedule, he consider their potential damaging effects.
Engaging in the process of lowering tariffs on favored industries and products will only increase economic distortions. Expanding the number of exemptions in a country’s tariff schedule leads to investment uncertainties and increased lobbying, if not corruption. As a former tariff analyst at the U.S. Dept. of Commerce, I realize that tariffs on products never work out well for consumers. I also know for certain that favoritism in trade policy is generally a national political and economic disaster.
Maryann O. Keating, Ph.D., a resident of South Bend and an adjunct scholar of the Indiana Policy Review Foundation, is co-author of “Microeconomics for Public Managers,” Wiley/Blackwell.