11,100 Job Gains vs. 514 Job Losses So Far
We’ve had a very positive response to our CPA Tariff Job Creation Tracker, published earlier this week showing gains of 11,100 jobs in four major sectors affected by tariffs. Following requests by readers, we’ve now expanded it into the CPA Tariff Job Tracker (TJT) to track both job gains and job losses.
So far we have identified 514 job losses specifically due to tariffs. As of today, job gains exceed job losses by a 20:1 ratio. All job gains and job losses refer to job changes that have either happened or have been publicly announced as planned to happen by the companies involved, with specific numbers included. We have not estimated any of these numbers; they all come from the companies concerned. We do not include threats of potential job losses, such as the threat of sacrificing an alleged 4,000 future jobs recently made by the CEO of Chinese-owned Volvo Cars. Many corporate leaders are making vague threats or forecasts with clear political motivations. We are going deeper and looking at facts and facts only.
In our previous article, we identified job gains in four sectors, all affected by Section 201 and Section 232 tariffs: steel, aluminum, solar panels and cells, and washing machines. These new job include additions to existing plants or the opening of brand new facilities by steel companies including Nucor Corp., aluminum producers like Aleris, washing machine makers like Whirlpool, and solar cell makers like First Solar. The only change to job gains in today’s TJT is the addition of Silfab, an Italian-Canadian solar panel maker that said this week that it plans to open two new manufacturing facilities in the 2018-2019 period, one in Canada and the other in the US. Silfab does not affect our job gain total as the company has yet to provide an estimate of how many jobs the US facility will create.
Many of the 11,100 jobs have been announced as planned but employees have not yet been hired. In some cases, facilities are still being built, or permits being sought, and hiring will follow after those steps. Nevertheless, these are concrete job plans. Most of the companies on our list are public companies and they only announce expansion plans to the public and the investment community after making genuine commitments, ratified by their lawyers, to implement those plans. See Table 1 below for a breakdown by sector.
Job Losses
Our tally of job losses so far is 514. Most of these are layoffs due to the increased cost of steel following the 25% steel tariffs implemented in March which has negatively impacted some companies where steel is a large part of their input costs. An example is Stack-On Products, which makes safes, gun vaults and similar products in the Chicago area. Earlier this week a Stack-On executive told the Chicago Tribune that the company intends to shut its two Chicago area plants in October and shift the production to its Mexico facility, partly to avoid the higher cost of steel due to the tariffs. Last August, Stack-On merged with Cannon Safe, with private equity firm MidOcean Partners taking a stake in the business. The indications are that the Stack-On operation was financially troubled even before the tariffs, but as management is saying tariffs contributed to the decision, we count it among layoffs due to tariffs.
Another major cause of job losses is retaliation to American tariffs enacted by other nations. In July polysilicon supplier REC Silicon announced it would lay off 100 workers in the state of Washington due to reduced demand from China for its products. This announcement also has a history in that REC Silicon’s workforce has fallen from its 2011 peak of 900 to just 400 before the July layoffs as a consequence of the solar trade battle that began a decade ago when China set a strategic objective of conquering the world solar market and the Obama administration responded with solar tariffs against China in 2012. See Table 2 below for a breakdown.
It should not be surprising that gains outnumber losses by a large margin. It is standard economic theory that tariffs will stimulate domestic production. That is precisely what the tariffs in these four industries are doing. A good example of the power of tariffs comes from motorbike manufacturer Harley-Davidson. Harley announced in May 2017 that it would move some motorbike production to Thailand to gain cheaper access to that country, which levies 60% tariffs on foreign motorbikes. Earlier this year, when the European Union announced a hike in tariffs on US bikes from 6% to 31%, Harley said it’s considering moving its production for Europe to Europe (when it actually does so and provides a number of jobs that will be eliminated in the US, we’ll add it to our Tracker). So it’s pretty obvious that if the US were to levy double-digit percentage tariffs on imported motorbikes, Harley would suddenly rediscover the advantages of producing in the US.
According to mainstream economics, the downsides of tariffs are that they can lead to higher prices and in the long term they can lead to inefficiency. However, both of these arguments are not particularly powerful at this moment. Price inflation is restrained due to a global oversupply of goods and labor, as my colleague Dan Alpert has explained in his book, which is well worth reading. US core inflation in July was still just 2.4%. Further, most of the pricing pressures which large company CEOs have cited on the recent series of earnings conference calls are due more to the prices of oil-related goods and services (such as freight charges), since the price of benchmark crude is up 35% in the past twelve months. The economy is robust this year and price increases in the tariffed goods are in general easily passed on. For many metal users, additional tariffs under Section 301 will provide them additional protection from foreign competition.
Finally, regarding inefficiency, in none of the sectors that have been tariffed is there a dominant monopoly or even oligopoly controlling production. All these sectors have struggled with sub-normal profit because of the pressure of foreign competition (benefiting from government subsidies and other unfair policies of foreign governments). Once these sectors are strong again, there will be plenty of opportunity to look into issues of inefficiency, should they arise.
In the meanwhile, ignore the exaggerated threats and the howls of pain from companies that dislike having to reorient their supply chains. Tariffs are creating far more jobs than they are sacrificing. The tariffs are working.
Table 1: Tariffs—Jobs Created
Sector
|
Number Jobs Created or Announced
|
Steel
|
4960
|
Aluminum
|
2899
|
Solar Panels/Cells
|
1150
|
Washing Machines
|
2100
|
Total
|
11,109
|
Table 2: Tariffs—Jobs Lost
Sector
|
Jobs Lost
|
General Manufacturing
|
288
|
Electronics
|
126
|
Technology
|
100
|
Total
|
514
|
Sources: All data is based on public announcements by companies concerned. All job announcements occurred between Feb. 1, 2018 and Aug. 16, 2018.
No comments:
Post a Comment