Tariffs Hit North American Industry

In today’s world politics is the word, but for many Americans it is still a dirty word. Barack Obama and his political campaign of ‘hope and change’ has been criticized for being too ‘divisive.’ The debates between the Democrats and Republicans on energy, health care and foreign affairs have only added to the rancor.

“In this election year, politics trumps aluminum,” declared Senator John McCain (R – AZ) at a debate. The comments by Senator John McCain, Presidential Candidate, captured the zeitgeist of the times and injected some humor when he stated, “You can’t keep losing money.” Yet, most experts point out that such comments rarely if ever bring about new investment, especially in traditional business and industry sectors. ” Politics, after all, is not an academic subject taught at universities,” noted Dr. Gobind Daryanani, a former executive with the Minnesota Mining and Oil Corporation. “The reality is that politicians have little or no understanding of how the business community actually operates.” “This explains why corporations are flocking to buy government bonds that are rated with ‘AA+’ or ‘A++’ instead of ‘B-,’ ” added Dr. Richard Kagan, a professor at the Columbia University School of Business.

“The adage that politics is war is very much true in the case of aluminum investments,” added Ed Lepeway, manager of communications for Silver Star Foods, Inc., which produces and markets peanut butter, eggs, creamers, steak spreads and crackers in 50 countries around the world. “We’ve seen a steady rise in the price of our commodities since 2021, when we first started considering the possibility of bringing manufacturing back to our nation from China. The more we researched the economics of U.S. imports and the effects of tariffs on those imports, the more we realized that we were making a mistake by ignoring tariffs and increasing our purchases of Secondary Aluminum. The adage that the price of something is always higher when taxes are increased, then it makes sense to buy more of this metal when the price is low.”

“When looking at the economics of aluminum investments in Canada, there are many positive reasons to invest in this metal,” added Lepeway. “One obvious benefit is the ease of finance. As long as the government continues to inflate the currency and purchase more domestic monetary assets, Canadian companies will be able to take advantage of a strengthening dollar and raise their prices. When that happens, consumers across Canada will have more buying power, which means that goods and services will become more affordable.”

In the second part of this two part expose on the economics of Canadian aluminum investments, The Wall Street Journal takes a look at the impact of high tariffs on the United States economy. In a July article, the Journal reported, “The slump in U.S. exports is being offset by a rebound in manufacturing. And a rise in Canadian softwood lumber imports is helping to solidify the gains of this recovering economy.”

Although the U.S. is often seen as the victim in trade war situations, this is not always true. In an August article in Investor’s Business Daily, Elizabeth Evans and Terran Melconian explain how tariffs placed on Chinese imports have created an imbalance in the global supply chain. “This has had a ripple effect in Canada,” they write. “For instance, Canadian producers have been forced to reduce their exports in response to rising American demand for aluminum.” The Journal refers to the situation as “NAFTA-driven trade challenges.” That refers to the North American Free Trade Agreement, which is what is commonly known as a “trade war” scenario.

Tariffs on certain products have reached the point of no return, and the international supply chain is suffering as a result. However, one sector has benefitted from the current trade imbalance, and that is the furnishing industry. According to the Conference Board of Business Outlook, “rising import rates and falling exports have increased the price competitiveness of U.S. goods.” The United States has been one of, if not the largest exporters of manufactured goods in the last several years. For this reason, many northern manufacturers feel that their futures are secured, especially with a “buy American” policy that is in place.

While the debate continues to rage over the direction of trade between the U.S. and Canada, there is no question that high tariffs have hurt the United States’ ability to protect its own interests. Many economists agree that lowering tariffs or removal would be a large step backward for the United States, but there are many who support the idea that high tariffs are a necessary part of doing business in North America. By protecting the supply chain, businesses stand to benefit as the Canadian economy grows and becomes a world leader when it comes to providing jobs. Tariffs and regulations might keep some people in their home country, but high-paying jobs are on the way to Canada – so everyone wins in the end.