Michigan faced serious economic hurdles in the aftermath of the 2008 recession and has worked diligently over the past decade to recover. But now the federal government is considering regulatory action that could erase the progress made in recent years.
The Trump administration has put in place high tariffs on imported steel and aluminum in an attempt to rebalance trade relations with other countries. Unfortunately, this muscular approach indicates a lack of consideration for their retaliatory effects on domestic markets – particularly the magnitude of the impact on the auto industry.
Detroit’s relationship with auto manufacturing is central to its identity and economic heritage. It has a historic role as one of the state‘s largest employers, contributing to the region’s renewal in recent years. With 60 headquarters in the Detroit area alone, this industry supports more than 180,000 jobs in a variety of positions along the supply chain, including assembly, engineering, services and more.
Detroit’s self-economy is supported by small and medium-sized businesses downstream from the big parts suppliers who solve the many supply chain issues that industrial America faces. This includes toolmaking, mechatronics and metallurgy so that large international companies have reliable access to essential services and components to create a finished product from scratch. As vehicle electrification becomes mainstream, clean energy innovators are drawn to Michigan to take advantage of this huge asset.
However, due to the interconnectivity between small, medium and large businesses in the region, the financial consequences of this administration’s pricing policies have the potential to wreak havoc on businesses at all levels. Large businesses may survive, but small and medium-sized businesses, the ones that are the backbone of communities across Michigan, will suffer.
Without free trade, or at least reduced tariffs on steel and aluminum imports, owners of small and medium-sized businesses will face dire consequences. Steel and aluminum tariffs will lead to higher raw material costs, as well as higher costs for consumers. As manufacturing plants lose profits due to inflated production costs, jobs will be lost and regional growth will be slowed.
Nowhere is free trade more important than in Michigan. Because they add unnecessary costs to the balance sheets of small business owners, tariffs threaten to hurt an industry already struggling with unprecedented competition and change.
While the president’s willingness to renegotiate trade imbalances is understandable, these actions only worsen market conditions. The recent signing of the United States-Mexico-Canada Agreement is an important step that must be taken to re-engage our most valuable trading partners, but it still leaves Michigan in considerable uncertainty. Taxing an industry in transition to a new era of clean and advanced mobility threatens more than 180,000 jobs and an industry that exports $ 29.9 billion in transportation goods. He deserves protection and support, no greater obstacles.
Tariffs on the basic materials needed for so many industrial products act like a tax on Americans in the Rust Belt, outright. As auto factories struggle to overcome inflated production costs caused by rising prices for steel and aluminum, jobs will be lost and growth will be slowed. Hopefully, this administration will continue to listen to the voice of America’s economic engine, and turn the tide before it’s too late.
Michael Alaimo is executive director of Clean Fuels Michigan.