Trade Cases

CEOs See Tariffs as a Negative for Capital Investment

September 25, 2018

“The tariffs are working, just give it time,” say Trump administration officials. “Short term pain—long term gain,” they add, seeking to placate the concerns of the business community. But the majority of those responding to a recent poll aren’t buying it. A survey of 141 CEOs by the Business Roundtable shows 63 percent believe that “recently enacted tariffs — along with other changes to trade policy and uncertainty about future trade actions — will have a moderately or significantly negative effect on their companies’ capital investment decisions over the next six months.”

“Contrary to the assertion that new tariffs and trade restrictions are making our economy stronger, almost none of our companies see it as a positive,” said Business Roundtable President and CEO Josh Bolten in a call with reporters on Monday. “These negative effects have important implications, not only for our member companies but their suppliers, many of which are small and medium-sized businesses.”

Bolten noted that tax and regulation reform has been a tailwind for job creation and capital investment, but recent trade actions are now becoming “substantial and growing headwinds.” Tariffs on steel and aluminum and Chinese goods are disrupting supply chains and making U.S. companies less competitive overseas, he said.

“It’s hard to draw conclusions from our survey about exactly which element of the administration’s trade policy is causing the largest anxiety, but all of the trade-restrictive measures are to one degree or another causing significant concern and we believe a hesitancy about long-term investment among many of our companies,” Bolten said.

In an interview with NPR, White House Trade Advisor Peter Navarro refuted the idea that tariffs on Chinese goods will cause pain in the U.S. by increasing prices for consumers and businesses. “This economy is doing great, wages are going up,” said Navarro. “The effects of these tariffs will be negligible from a macro point of view.”

Bolten says the White House is willing to listen to concerns of the business community, but fails to take their advice.

“On issues with respect to China, most of the companies at [the Business Roundtable] agree with the administration that there are significant problems there, structural problems in the way that China has approached the international trading system,” Bolten said. “Where we have disagreed so far is whether the imposition of tariffs ought to precede serious negotiations or simply be held out as a threat if the negotiations don’t bear fruit. We will continue making that argument and I’m hopeful the administration will at least remain somewhat receptive to hearing us out on those points.”

(Source: Inside U.S. Trade)