“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore — we win big. It’s easy!”
There’s no telling how U.S. Sen. Jim Risch of Idaho reacted to that tweet five months ago. But the former Gem State lieutenant governor and governor, who now oversees the Senate Small Business Committee, readily acknowledges that trade wars and Republicanism don’t usually go hand in hand. Nor is it usual to see someone exerting executive office privilege in single-handedly setting tariffs to punish offending nations. So during a phone interview between Senate votes on July 11, Sen. Risch was politely asked what the hell is going on.
“The president keeps saying, ‘Be patient with me. I’m going to get these things done and at the end of the day we’ll be better off than we are now,’” Risch told NIBJ. “The fact of the matter is, I can worry about it, but, man, he’s had a year and a half to screw this up and hasn’t yet. So I guess I’m willing to be patient a little longer. In fact, it’s going the other direction.”
Risch got no disagreement when he pointed out that contrary to conventional wisdom, worries over a cataclysmic stock market plunge have been unfounded.
“I’m starting to wonder if those guys on Wall Street know a whole lot more than I do,” he said. “If I were a Wall Street trader, I’d have everything in cash and I’d be hiding under the bed.”
Point taken. As of this writing, Wall Street was greeting rising tensions over trade and tariffs with a good stretch and a yawn. Yet unease throughout the Western Hemisphere over the uncertain future of the North American Free Trade Agreement — NAFTA — and temblors felt from more localized tariff impacts were palpable in certain quarters. One of them affects the product you’re reading right now.
As the Hagadone Corporation’s publisher overseeing multiple newspapers and commercial print work in Idaho, Larry Riley told Risch that a recent tariff targeting newsprint manufacturers in Canada raised his costs nearly 30 percent. They’re costs he says are too prohibitive to pass along to customers yet pose a real threat not just to profits, but to local jobs.
“Newsprint tariffs are doing more harm than good and have left the industry in an untenable situation,” Riley said. “Putting this into context, outside of payroll, newsprint is the highest line-item expense for a newspaper publisher. And the effect of these tariffs has been immediate and consequential. Think about it. What legitimate business can absorb a 30 percent price increase for its No. 2 expense without consequence?
“There are none.”
Risch, who has talked with Riley, is sympathetic. But as the president, Congress and the U.S. Commerce Department consider what to do about newsprint tariffs, Risch said he understands some of the consternation about trade and tariffs with our neighbors to the north. In some ways we’re getting milked, he said.
“If you’re a dairyman in Boundary County and you’re trying to sell a product 20 miles away, and they’re going to charge you 247 percent tariff on it, they understand it and they understand it very clearly,” Risch said, noting that Idaho is now the nation’s third-largest dairy state in the nation, behind California and Wisconsin.
And yes, you read that right: Canada imposes a 247 percent tax on milk brought in from the U.S.
Providing a little history, Risch said NAFTA was created to make all of North America a free-trade zone, so Canada, the U.S. and Mexico could trade freely without any tariffs imposed.
“That was the purpose of NAFTA in the first place,” he said. “Where this is headed, I believe, is either no agreement, a NAFTA-type agreement with all three countries, or the most likely scenario in my mind is, two different bilateral agreements between the United States and Mexico and the United States and Canada.
“The president feels very strongly that we, the U.S., are getting the short end of the stick under NAFTA… He wants to see a much more level playing field. Frankly, he has some very legitimate points but there’s a lot of us who really believe that for tranquility in the marketplace, we need to get these done and get them done as quickly as possible.”
So there’s a tidal wave of outrage from your constituents, eh, Senator?
“Really not much from constituents,” Risch said. “Interestingly enough, we get almost no input on tariffs. It is so complex, I think people have difficulty getting their arms around it. What I’m hearing from the ag industry, of course, is they’re afraid that imports to China are going to decrease, and when they do it’s going to cause prices to go up. It’s going to flood our market and cause our prices to go up.”
One constituent, though — that would be Mr. Riley — says something has to give. Riley noted that a bipartisan collection of members of Congress is appealing for a reversal on the newsprint tariff, saying that the tax alone could lead to massive layoffs and the closure of some newspapers.
“The presumption that rising newsprint costs can simply be passed along to users is misguided,” Riley said.
He said his company has not laid off staff like many newspapers have, but when there’s attrition, most of those positions are not being filled.
“A reversed decision can’t come soon enough,” Riley said.
Riley’s pain might not be far away from consumers of other products, Risch acknowledged. But as of his mid-July NIBJ interview, that wasn’t happening.
“What academia says is that the consumers are going to wind up on the short end of this because if there’s a tariff put on, consumers ultimately wind up paying that bill,” he said. “I hear that from a lot of academia people, but I hear otherwise also — the argument being that all of this stuff is so convoluted, and it is so big, that it is not going to materially affect retail prices. I don’t think you can take that bold statement and put it across the board. I don’t see how certain products aren’t going to be affected.”
So what’s next?
“I gotta tell you from my own standpoint, I’m willing to be patient for a little bit more because we haven’t seen the deleterious effects that have been predicted. On the other hand, I’m as impatient as everybody else. I want this done, and I want it done sooner rather than later.
“There’s one person who’s in charge of this. I speak to him regularly. I’ve urged him to get these things done as quickly as possible, and it isn’t just me. Of the 535 members of Congress, I would say that the vast majority of them are in the same place I’m in.”