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Op-ed: How tariffs hurt Texas companies and why they must be used cautiously

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Washington, April 27, 2018 | comments
As published in the Houston Business Journal

China’s dishonest and unfair trade practices are hurting the American economy and costing us thousands of jobs. China steals our intellectual property, forces our companies to turn over their best technology, and grossly distorts markets through government subsidies.

President Donald Trump is right to take a hard line against China’s predatory policies and significant trade violations. The challenge for every president, however, is how to change China’s behavior without harming our families, businesses, farmers and ranchers here at home. To penalize China, the Trump Administration has imposed tariffs on steel and aluminum products entering the U.S. from all over the world. It also proposes to place tariffs on $50 billion – and possibly an additional $100 billion – of Chinese products.

While I agree that we must punish China for its abuses, I also believe that tariffs can create overwhelming damage to Americans and must be used cautiously. Tariffs are taxes and will ultimately be passed on to consumers. Like taxes, they curtail economic growth, discourage new investment, delay new hiring and put American workers at a huge disadvantage to foreign competitors.

It’s important to ensure our trade policies build on the economic momentum of our recent tax cuts. In Texas, manufacturing in February was booming, but according to a report by the Dallas Federal Reserve, factories cut production growth by more than half in March due to concerns over higher costs from the potential steel and aluminum tariffs. The new orders and growth rate of orders also fell by more than half.

Here in the Houston area, Navasota, Texas-based Grant Prideco was planning to grow by up to 500 jobs at an oil field manufacturing plant as the energy sector recovers, but now could face job layoffs if the fairly traded steel that it imports is subject to tariffs. That steel is not made in the U.S., and if the company can’t get it, it will lose to foreign competitors who do not face these barriers.

This month I heard directly from Kennedy Fabricating, a steel fabrication company from Splendora, Texas, which is in Montgomery County, regarding the impact of tariffs on day-to-day operations and long-term planning. Kevin Kennedy, president of the company his father started 30 years ago that now employs over 350 people, testified before the U.S. House Committee on Ways and Means, which I lead, and shared that tariffs are making his business less competitive.

 

“These tariffs have eliminated imported steel overnight, and without any competition, U.S. steel producers have raised prices over 40 percent. This means that a company in China can now purchase a raw steel beam from a Chinese mill at a 40 percent discount, drill two holes in it, and ship it to the U.S. as a fabricated good without a tariff. And it’s not just China. One of our Canadian competitors just went from a position of losing projects to us, to now winning projects at our expense, because they can import raw steel to Canada without a tariff and purchase it 40 percent cheaper than we can from our own domestic suppliers. This . . . has already cost us millions of dollars in work,” Kennedy testified.

Kennedy’s experience highlights why it is vitally important to use a targeted line of attack in enforcing our rights and imposing tariffs. I appreciate that President Trump is taking a measured approach by putting in place a process to exempt products and countries that are not the problem, and providing an opportunity for China to change its ways. 

I remain committed to working with President Trump and the White House on strong, enforceable trade policies that will target bad actors like China and encourage economic growth at home.

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