Politics is one of the many hot topics in the news today. Is there really a secret in politics? Is there really anything that you can learn about politics from watching it? Politics is a subject that seems to drive people crazy. Is there really a secret in politics? Well, the answer is no.
But politics experts point out a convergence of many varied causes: global economics, bilateral trade war, presidential politics, and a $16.3 billion worth of aluminum imports from China, the largest exporter of that metal in the world. So, if you’re reading this article, chances are you are tired of watching this advertisement. Hopefully, though, you’ve also realized that this commercial cannot break the spell of political apathy that has enveloped American politics over the last 15 years.
What is this super-secret political advertisement that is keeping everyone from watching Andy Lack’s ad about importing aluminum? Well, there are two facts that we need to take into consideration. First, we need to remember that our current administration has not picked a replacement for Elliot Spitzer yet. The next president will most likely not have the same foreign-trade views that outgoing President George W. Bush had.
Second, the U.S. has been trying to win trade war with China over the last few years. However, the United States has been lagging behind China in several key sectors of industry. For example, China is now the largest exporter of automobiles, and in the last few years, their goods have flooded the American market. This has forced many American car dealerships to raise their prices for imported cars. Many of these price increases were implemented because of President Bush’s tariffs on China, but they were already raised under the terms of his original tariff war policy.
Now let’s look at aluminum importation. Since China manufactures the majority of all the aluminum that is used in the United States, and Mexico produces more than half of that, it would make sense that the Chinese government would like to see the United States follow suit, so they are attempting to increase imports of aluminum as well. If this effort takes hold, and the United States begins raising their prices on imported commodities such as aluminum, Canada will be forced to increase their own imports as well. In addition, the Canadian government may even take steps to increase its own tariffs on U.S. producers of steel, iron, coal, and other minerals. This means a worldwide effect on markets and prices.
However, let’s look at this from an international perspective. If the Chinese government tries to dictate where aluminum or other raw materials are sold, we could see a problem with our trading partners, and even our allies. Indeed, some worry that increasing U.S. aluminum tariffs will lead to Canada increasing theirs, and vice versa. In fact, Canada has been working on a new plan that may see some American imports coming west, and the new plan hasn’t been cheered by our closest trading partners, including Canada.
So what does this all mean? For us in the United States it means the continuation of higher prices for our imported goods. For those foreign investors who own shares in American companies, it means that their wealth may now be subject to higher taxes and possibly penalties if they bring their cash home and buy shares of American companies, as they’ve been doing for many years. For consumers it means that gasoline prices may go up, and food prices may go up. For the remainder of America’s working class, it means they’ll have fewer resources to buy necessities if the economy tanks even harder.
What’s really scary about all this is that the problem wasn’t likely going to go away any time soon. The problem with aluminum is that it’s been an easy target for dumping by China, and it was never going to make a return to the U.S. market, either due to a higher price in the U.S., or a lack of demand. As far as what this means today for American workers, it’s hard to say, but it’s certainly worth monitoring. For those in Canada, it means that you can go ahead and invest in U.S. stocks and you can also buy aluminum stocks, and there are certainly Chinese suppliers of aluminum as well. But again, it’s hard to say what impact this decision might have in the short and long term.