S.U. Business Prof: New Tariffs are an "Old, Counterproductive" Model for a Modern, Global Economy

Mar 9, 2018

Rolls of aluminum come off the line at the Novelis plant in Oswego. President Trump says the tariffs on imported aluminum and steel are aimed at preserving or expanding jobs at plants like this.
Credit Novelis, Inc.

The New York economy is bracing itself for the impact of a new tariff being rolled out by the federal government.  President Trump is has enacted] a 25 percent tax on foreign steel and a 10 percent tax on aluminum.  Tariffs are usually meant to bolster domestic industries and products, but Whitman School of Management International business studies Professor Peter Koveos says this ignores how much industry has changed.

"You really don't have the old means of production anymore because everything is automated.  To impose an old school, old world model on the economy is really counterproductive."

Koveos warns the tariffs seem to lack foresight and have not been constructed with thought to far-reaching consequences. He says the administration tends to view cooperation with foreign countries as a threat to U.S. sovereignty.

"The president seems to be guided by a group of very conservative, very opinionated advisors that do not believe in international business, international trade.  They see international trade as basically a zero sum game.  This is going back 200 years.   You cannot give political solutions to economic problems." 

Koveos says cutbacks on research and development, along with efforts to revert the economy back to outdated models will only hurt the U.S. long-term.  But how might businesses in Central New York be affected?

Crucible Industries in Solvay could also benefit from the tariff.
Credit crucible.com

"Many of our companies are on the fence as to whether they should expand their export activities.  Certainly something like this diverts their attention from international business.  In the long run, that ignores the reality of today's global economy."

Koveos says another unknown is the potential impact on the value of the U.S. dollar as other countries may retaliate with similar tariffs.  He says both the president and the American people may not fully understand the long-term effects of such harsh policies that seem to contradict the administration’s previous efforts.

"They're proposing tax cuts, according to their scenario, and on the other hand, they're increasing taxes. Obviously if it increases the cost of imports, it increases the cost of living for an American family."

The administration says is allowing exemptions for Canada and Mexico.  But Koveos warns this could fuel tension among other countries who feel entitled to similar exemptions.