U.S. Consumers Bearing the Brunt of Tariffs and Quotas

Jessica Lutz
Posted March 13, 2019

The administration is considering doubling down on its trade war despite repeated warnings and thorough evidence that tariffs and quotas are negatively impacting American consumers, even while failing to lower the U.S. trade deficit. We can now add one more report to that long list of evidence with the release of a new analysis from the National Bureau of Economic Research (NBER) with all-too-familiar findings: the economic impact of trade restrictions is falling solely on consumers – not the countries that they target – despite the Administration’s claims. This serves as an unfortunate reminder that tariffs are a tax on imported goods that is paid for not only by American businesses but potentially consumers.

According to the report, the U.S. economy has lost $68.8 billion annually due to higher import prices caused by the administration’s tariffs imposed on imports and the resulting retaliatory tariffs on U.S. exports. Even after accounting for the revenue boost to domestic manufacturers – a result of the higher prices forced by tariffs – we’re still left with an aggregate $7.8 billion loss.

It’s worth noting that these numbers apply only to tariffs and don’t even begin to measure the damage to our economy from quotas on imported steel, which are pre-set limits that suddenly and arbitrarily cut off a critical supply stream for U.S. companies.  The U.S. has already imposed steel quotas on Argentina, Brazil and South Korea, and has recently indicated that it intends to replace steel tariffs on our continental trading partners with “reasonable quotas Canada and Mexico can live with.”  For the U.S. energy industry – which supports 10.3 million American jobs – quotas are already restricting imports of steel that could be used to create more jobs and build more infrastructure to deliver affordable energy to American consumers. Instead, quotas would inflict even more harm to our economy than tariffs as they prevent much-needed steel from crossing the border and result in lengthy delays or even cancelations of major construction and manufacturing projects.

API’s Kyle Isakower summarized the situation in a recent Washington Examiner op-ed:

"It’s hard to find any winners here, and that includes the American steel mills whom the tariffs are designed to benefit. By either declining to bid, or by submitting alternative specifications, domestic steelmakers acknowledged they could not supply the required materials for this project. That’s why about three-quarters of the steel used in U.S. pipelines is imported. And it’s also understandable that American mills would opt not to spend millions retooling their operations to produce these specialized products. Specialty line pipe, critical for energy projects, represents just 3 percent of their market.

"Importation of specialty steel products is the only option, an option that has worked well for decades. But while tariffs significantly increase costs of imported steel materials, quotas could cut off access entirely."

The U.S. is leading the world in the production and refining of natural gas and oil, which is keeping energy affordable for consumers – both at the pump and at home – benefitting American workers, bringing well-paying jobs, boosting our economy and advancing us toward the promise of ongoing prosperity and opportunity for present and future generations. Despite these facts the Trump administration continues to push tariff and quota policies that work against domestic energy production.

The U.S. energy industry relies on smart policies to continue providing safe and reliable energy to consumers, and more importantly, consumers rely on the government to implement smart policies that protect their interests. The administration’s tariff and quota trade policies, quite simply, do neither.