There’s a trade war brewing in the White House—and President Trump will soon have to choose a side.
In January, Commerce Secretary Wilbur Ross recommended protectionist tariffs on steel and aluminum imports, the specifics of which were released on Friday: Ross wants Trump to place steep tariffs and quotas on the world’s biggest dumpers of aluminum and steel—most notably, Brazil, China, Turkey, Russia, Venezuela, and Vietnam.
Axios quotes one anonymous “trade expert” as saying, “This would be beyond a trade war. You’re talking about blowing up the WTO [World Trade Organization].”
Robert Scott, a trade economist at the Economic Policy Institute who supports stronger trade restrictions, says such a comment is laughable. “Total U.S. steel and aluminum imports in 2017… made up less than 2 percent of total U.S. goods imports,” Scott said in an email. “If other members of the WTO want to throw out the whole deal over what amounts to a tiny share of total U.S. and world trade, then that is their problem.”
He added that a more useful response than knee-jerk alarmism about trade wars “would be to encourage other fair trading countries to join the U.S. in eliminating exports from unfairly trading nations that are the targets of these (possible) trade restrictions.”
Ross’s proposal includes a 23.5 percent tariff on aluminum from China, Russia, Venezuela, and Vietnam (7.7 percent on other countries) and a minimum 53 percent tariff on steel from Brazil, China, Costa Rica, Egypt, India, Malaysia, Korea, Russia, South Africa, Thailand, Turkey, and Vietnam (24 percent on other countries). There would also be quotas on aluminum and steel imports, limiting countries to 2017 export levels or lower, depending on the country.
The issue of trade protectionism is fueling an internal war among Trump’s top advisers. The so-called globalist wing, including Gary Cohn, Steven Mnuchin, Rex Tillerson, and James Mattis, are all vehemently opposed to imposing tariffs that they worry would spark a trade war that would upset global markets and aggravate diplomatic relations. The protectionist wing—including Ross and U.S. Trade Representative Robert Lighthizer—occupies a lonely island within the administration.
Under U.S. trade law, the president has 90 days after Ross’s January recommendations to take some type of action. During the presidential campaign, Trump promised to crack down on Chinese trade manipulation—namely steel and aluminum dumping—and to restore U.S. industries, but as I reported in January, his administration has delayed and deferred action through his first year in office.
Trump, of course, notoriously flip-flops his positions based on the last person he spoke with, and it’s unclear which way he is leaning. He has already shown a willingness to implement tariffs on washing machines and solar panels. The question is whether he would defy his top military, diplomatic, and economic advisers on such a critical issue.
This was the populist fight that Steve Bannon hoped for when he was still in the White House. Trump has until April to make a final decision. Until then, the White House’s internal trade war is sure to intensify.
The new trend of companies rewarding employees more often with one-time bonuses and less often with permanent pay increases has drawn greater attention in the aftermath of the Trump tax cuts, as corporations have made flashy announcements about how they are delivering one-off rewards to employees (though not all employees).
TheNew York Times had a front-page story on Sunday entitled “What Happened to Your Raise? It Could Have Become a Bonus.”
As economics reporter Patricia Cohen writes, “Ordinarily, the jobless rate and wage growth are like two ends of a seesaw: When one drops, the other is supposed to rise. But that link seems broken, and like film-noir detectives, analysts have scrutinized hard-edge statistics and fuzzier psychological indicators for clues about why.”
Part of the reason is that companies are opting to spend less of their profits on higher regular employee paychecks and more on one-time bonuses that, as we’ve seen recently, make for savvy public relations. According to a Times analysis of a survey by Aon Hewitt, a human resources consulting firm, spending on bonuses amounted to an average of 3.1 percent of total compensation budgets in 1991, but by 2017, that share rose to 12.7 percent. Meanwhile, the share dedicated to permanent raises fell from 5 percent to just 2.9 percent.
The average worker’s pay has remained stagnant for the past few decades. The shift to a bonus-based economy is part of a larger effort by business leaders to cut labor costs down to the bone. Bonuses, of course, are welcome news for many workers—but not if they’re coming at the expense of a sustained pay bump.
Permanent salary increases mean higher fixed costs—and slimmer profit margins. One-time bonuses, with no guarantees, are cheaper. As is the outsourcing, union-busting, contracting, on-demanding, and part-timing of the American workforce. That is what is keeping wages low even in a very tight labor market.
The problem is not that corporations don’t have the money to invest in their workforce. It’s that they’re just choosing to plow it all back to the shareholders and CEOs. A recent analysis found that S&P 500 companies have promised $3.7 billion in one-time bonuses and announced more than $157 billion in stock buybacks.
The problem is that even with what many economists say is close to full employment, a tight labor market is apparently not a strong enough countervailing force for sustained pay increases over skimpy one-time bonuses. At one point, unions were that force.
(Photo: AP/Richard Drew) The Charging Bull sculpture by Arturo Di Modica, in New York's Financial District, is shown in this photo, Wednesday, Feb. 7, 2018. The current bull market is set to turn nine years old in about a month. trickle-downers.jpg I n the aftermath of the Trump tax cuts, Republicans have endlessly crowed about how corporations are using their newfound savings to give their employees wage hikes and bonuses. Paul Ryan even boasted on Twitter about a high school secretary who was surprised to find an extra $1.50 in her weekly paycheck, which could more than cover her annual Costco membership fee. The tweet was quietly deleted a few hours later. But not before critics pounced on the absurdity of bragging about such meager benefits, considering that the entire tax cut came to roughly $1.5 trillion. As Vox’s Matt Yglesias tweeted: $1.50 a week times 52 weeks in a year times 330 million people only comes out to $25 billion or so. Where’d the rest of the money go? https://t...
It was just a few months ago that Wisconsin Governor Scott Walker unveiled a massive deal that would give the Taiwanese manufacturing giant Foxconn $3 billion in tax subsidies to open a $10 billion LCD TV factory, promising to bring 13,000 jobs to southeastern Wisconsin.
That’s a public cost of $230,000 per job. Initial estimates found that the state wouldn’t break even on its investment until 2043. On top of the massive tax subsidies, Foxconn will benefit from a host of other goodies—lower electricity rates, state funding for road construction and worker training, exemptions from certain environmental regulations, and unprecedented special treatment in the state court systems.
In short, Walker handed a foreign corporation the keys to the government.
Now, with another major manufacturer threatening to cut hundreds of jobs in Wisconsin, Walker is doubling down on his corporate welfare program. Following the passage of the GOP tax cut, Kimberly-Clark (the company that makes Kleenex, Huggies diapers, and Cottonelle toilet paper) announced in January that it would deliver a dividend increase for its shareholders and a $2.3 billion share buyback. The company said it would then use the remainder of its tax cut savings to restructure its operations.
That apparently means cutting 5,000 jobs in the United States, including 600 positions from its operations in northeastern Wisconsin. The company turned a $3.3 billion profit in 2017.
In a last-ditch effort to save those jobs, Walker is falling back on his Foxconn playbook. On Monday, he proposed legislation that would give Kimberly-Clark the same deal as Foxconn: 17 percent tax credits on qualifying wages at the company’s two plants.
To keep 600 jobs here in Wisconsin, I asked the Wisconsin Economic Development Corporation to offer Kimberly Clark the same deal for jobs as Foxconn. @WEDCNews
As the Milwaukee Journal-Sentinel points out, Wisconsin taxpayers would be on the hook for $8,500 in Kimberly-Clark tax credits for one $50,000 salaried job.
Walker is running for re-election in 2018 and he’s faced scrutiny over his failure to make good on a 2010 campaign promise to create 250,000 jobs in the state. He’s not only failed to meet that mark by nearly 65,000 jobs, but Wisconsin’s manufacturing industry has continued to wither away.
The conservative governor has failed to entice businesses to set up shop with his policies of union busting and deep budget cuts to everything from the public university system to infrastructure.
As Walker has attacked public welfare programs (he’s pushed for drug-testing requirements for state welfare recipients and work requirements for Medicaid beneficiaries), he’s unabashedly set up a generous corporate welfare program that flies in the face of the GOP’s purported vision of free-market capitalism.
After privatizing the state economic development agency in 2011, Walker has lavished companies with lucrative tax subsidies. In return, companies like Ashley Furniture have announced layoffs, offshored operations, or simply failed to meet job-creation promises.
The Foxconn deal may be the biggest, but, as Walker has shown, it will be far from the last. The governor has now invited any Wisconsin company to threaten to uproot unless it gets a sweet new tax subsidy.
The first jobs report of 2018 is out, and overall the news is pretty good. President Donald Trump and congressional Republicans will certainly try to take credit for the job growth and higher wages. But it would be more accurate to attribute this uptick to state labor policy—not the superiority of MAGAnomics and massive tax cuts.
The United States added 200,000 jobs in January, making this the 88th straight month of job growth, and the unemployment rate held steady at 4.1 percent (though the black unemployment rate jumped back up to 7.7 percent, just days after Trump boasted about historically low rates in his State of the Union). Meanwhile, average hourly earnings for private-sector workers increased by 0.34 percent this month, and 2.9 percent over the past year.
Wage levels have struggled to gain traction in recent years, even as the labor market has tightened. But for labor economists and workers alike, these most recent increases could be a sign that wages might finally be on the upswing, thanks to progressive state policies. In the new year, 18 states across the country—from Florida to Maine, and from Washington state to Michigan—hiked their minimum wages, bringing $5 billion in additional pay to 4.5 million workers, according to the Economic Policy Institute.
Despite staunch resistance from Republicans and the business lobby, worker-led movements like the Fight for 15 have had a great deal of success in increasing pressure on state and municipal lawmakers to increase minimum pay. The results are now evident in jobs reports, and it’s pretty clear that one of the best ways for the Trump administration to boost pay is to push for a higher minimum wage.
As today's jobs report shows, if Trump really wanted to goose wages, he'd raise the national minimum wage to like $10 an hour.
But will Trump and congressional Republicans finally come to accept minimum-wage increases as sound economic policy? Don’t count on it. The federal minimum wage, which is still $7.25 an hour, hasn’t gone up since 2009, and its value has only withered since. The issue has become highly polarized in Congress, with Republicans doubling down on the argument that any increase to the federal minimum wage will kill jobs and hurt business, and that the only way for wages to go up is to ease taxes on corporations and let it all trickle down.