The South’s economy, the third largest economy in the world, has been humming along nicely since 2010 when 594 projects were announced meeting or exceeding SB&D 100 thresholds. It was an awesome comeback year after the recession of 2009 cratered the “100” with just 367 projects, the lowest on record. In fact, the last four years are the best years in SB&D 100 history, averaging 693 projects announced in the South every year with at least 200 jobs and/or $30 million in investment.
Yes, we are in the second longest economic expansion in this nation’s history, and the longest consecutive monthly job gain period ever. Yet, as of the spring 2018 quarter, those economic streaks are now in jeopardy. Without Congressional approval, our president slapped tariffs on allies in Europe, Mexico and Canada. According to reports, he did it for “national security” reasons. What does that mean?
So why is this administration dismantling the global economic order that we — Republicans and Democrats — crafted over the last 75 years? Your guess is as good as mine because the president is really messing with a good thing. We are at full employment and there is nothing wrong with a trade deficit. We might not feel the initial effects of tariffs in the current economic expansion, but we will surely feel them when this expansion slows to a stop, aided by what are essentially taxes on goods made by our allies and others.
What we need are more free trade deals not less. For instance, over the last decade, the Southern Automotive Corridor has lost out on about 10 auto assembly plants to Mexico. The main reason being is Mexico has free trade agreements (FTAs) with 46 countries. We had FTAs with 20, but that is now down to about 12, maybe less. And those who we slap tariffs on will retaliate and then less is sold and what is sold costs more.
The last time we set protectionist policies was the passing of the Tariff Act of 1930, better known as Smoot-Hawley. Even then, 1,028 economists signed a petition asking President Herbert Hoover not to sign the bill. He signed it anyway. What happened? The value of global trade dropped from $4.9 billion in 1930 to $1.8 billion in 1933 and the U.S. fell into an extended depression.
But, the current protectionist policies could cause more harm than in 1930. The reason is our economy is so much more global than it was in 1930. Here is an example: The 787 Dreamliner is built in North Charleston, S.C. Its forward fuselage is made in Kansas and in Japan. Its center fuselage and stabilizers are made in Italy. Its wings are made in Japan. Its wingtips are made in South Korea. Its rear fuselage is made at its main plants in Washington and at the North Charleston site. Its engines are made in the U.K. and in the U.S. Its fairings are made in Canada. Its landing gears are made in France, as are its passenger doors. And its cargo doors are made in Sweden. If there is a better example of globalization than how the 787 is made, show it to me.
Now that the tariff threat is a reality, no country will be a winner and neither will you. Buckle up because your trip on the 787 Dreamliner assembled in North Charleston, S.C. is going to cost more as a result of these tariffs.
After setting the tariffs on June 1, President Trump said, “Time to get smart!” There is nothing smart about protectionist policies, Mr. President. In fact, it is dangerous foreign policy. Over the years, tariffs have led to recessions, depressions, even wars. Hopefully, this is one of Trump’s on, off, on hold decisions on trade. If not, this is the worst economic decision a president has made since Herbert Hoover made his.