Beef, Furniture and American Workers

Beef, Furniture and American Workers

The president and his surrogates have repeatedly said that the purpose of the tariffs was to protect American manufacturers and replace the foreign workers with Americans. Is it working? Well the 50 percent tariffs on Brazilian beef have aided in reducing the supply of beef and raising its prices. Mission accomplished? Not quite. It seems that prices are rising due to the diminished supply. The beef eaters are unhappy. 

The beef industry is ecstatic but the consumers are not. The president seeks to then have it both ways by suggesting the importation of Argentine beef to beef up the supply much to the chagrin of US ranchers. A consumer wailing of almost equal proportions is the impact of the 50 percent tariff on coffee prices. Some have even raised the question as to whether Trump’s tariffs should be selective rather than global. But imposing tariffs on products not even grown or made in America makes even less sense than the tariffs in the first place. The senate has just voted to rescind the Brazilian tariffs with 5 republicans (you can guess who they were) joining all the democrats. I guess the Kona coffee lobby is not very powerful. The president of course will veto the bill. Isn’t it interesting that in the short run the president has turned the protectionist democrats into free traders?

The president also raised the tariffs on imported furniture to “help” the North Carolina furniture industry where employment in furniture manufacture has fallen from 90,000 in 1990 to less than 30,000 today. In 1990 only about 4 percent of US furniture was imported. Now it is more than half with the imports coming mainly from China, Vietnam and Indonesia.

Are the North Carolina manufacturers jumping with joy? Not quite. The remaining firms are dependent upon imported components. Bassett furniture imports most of its fabrics from China. The company also imports fabrics and plywood from Vietnam. This has caused the firm to raise its prices even though 80 percent of its total components are manufactured in the US and the furniture is assembled in North Carolina. The same is true with the other manufacturers who find that the tariffs are causing them to raise prices as well. What about manufacturing coming back into North Carolina? It is not happening for two reasons. First is the cost of US labor and second there is a shortage of skilled workers. One manufacturer said that labor skilled in sewing and woodworking is far between. Those skills basically vanished when the industry contracted over the years. Some companies are offering classes and apprenticeships but there is not enough interest among young people to learn those skills. One employer said “No 23-year-old is like ‘I want to be an upholsterer when I get out of school.” That company and others provide apprenticeships to young people work with the local community college system to help train up students to work on a factory floor. Meanwhile the new tariffs are forcing all to have to raise their prices to cover the higher costs of materials and components. The furniture makers have seen some price resistance among their customers. Cabinet manufacturers sales have fallen year to date as prices have gone up.

Of course this is a repeat of what happened with raising the costs of inputs like aluminum and steel. Research has shown that there was no increase in domestic employment. Rather the opposite happened as workers were laid off in those industries that used the metals as components. The president did not learn this lesson in the first term and has doubled down on it in the second term.

My old employer, the Congressional Budget Office projects that the tariffs and immigration policies will create a labor shortage and slow the rate of economic growth going forward. This of course assumes that these policies will continue post-Trump (which I doubt). There will be labor shortages and a negative impact on food production, construction and industries dependent upon foreign labor. The Labor Department has said in the Federal Register that the reduction in immigration will create a “labor shortage exacerbated by the near total cessation of the inflow of illegal aliens.” The new $100,000 fee for H1-B visas will cause the loss of hundreds of thousands of immigrant workers in sectors like information and educational and health services. But what me worry? The White House said Trump will continue “growing our economy, creating opportunity for American workers, and ensuring all sectors have the workforce they need to be successful.”

Yet it doesn’t look as though U.S.-born workers are entering the workforce en masse as foreign-born workers exit. Instead, the labor force participation rate for U.S.-born workers aged 16 and older has ticked lower over the past year. The White House said “There is no shortage of American minds and hands to grow our labor force, and President Trump’s agenda to create jobs for American workers represents this Administration’s commitment to capitalizing on that untapped potential while delivering on our mandate to enforce our immigration laws.”

Au contraire, one labor economist says that the White House is mistaken to assume a decline in immigration helps U.S. workers when job growth slows. “Immigrants both create demand for the goods and services produced by U.S.-born workers and work alongside them in ways that increase productivity for both groups,” he said. “While it is just one factor, we shouldn’t be surprised that opportunities for U.S.-born workers are falling at the same time an estimated one million fewer immigrants may be in the labor force.”

But not to worry. One of the president’s first actions was to sign an executive order suspending all refugee admissions. The Biden administration was allowing 125,000 per year to enter the country. Well the president has decided to reinstate the program with a cap of 7,500 – the lowest in history. Priority will be given to white South Africans. Apparently he has made up with Elon Musk. With the restrictions on the H1-B program, the shutting down of travel from 19 non-white countries and explicitly stating that “The admissions numbers shall primarily be allocated among Afrikaners from South Africa” the president is blatantly seeming to shut down entry by people of color and creating an easier pathway for white immigration. And it isn’t subtle. I wonder what Kash Patel, Vivek Ramaswamy, Harmeet Dhillon, Jay Bhattacharya and Usha Vance have to say about this?

But will the additional workers be need? With the growth in AI. Firms like Ford, GM, Amazon and Meta are laying off workers. Walmart says it can grow without hiring more workers. Michigan State has even developed an AI apple picker. 

So what will happen? Will the president be right? Will we have to wait until next year to see the benefits of his policies? What will happen to the tariffs. Will AI cause fewer native workers to be hired even as immigrant numbers fall? All those are empirical questions.