In one of those routine reminders that our cultural commitment to free markets is sometimes more rhetoric than reality, the Commerce Department has decided to impose tariffs of 97 percent to 162 percent on Chinese made aluminum foil. This is a rise from the already high 81% rate that the administration had imposed in the summer, which had garnered criticism.
Ostensibly enacted to protect domestic industry, the measure will do no such thing. Aluminum converters, the industry that processes and makes products from base aluminum foil, have opposed the lobbying effort. Converters moved away from US-made foil not because the imported product was cheaper but because domestic foil “was the source of over 95% of [their] raw material rejection”.
Even if they improve product quality, the two American aluminum foil manufacturers are out of the running due to low production capacity. With Chinese base aluminum foil now cost-prohibitive, US aluminum converters will have to source from Eastern Europe, Russia, and Asia.
Not only will this economically illiterate measure fail to achieve its claimed goal of supporting the American foil manufacturing industry, it also cripples the much more vibrant industry of aluminum conversion.
With foreign manufacturers no longer facing competition from Chinese companies for the lucrative US market, we should expect prices to rise.
Considering that foil is used for everything from medical supplies to kitchen products to food service, it is hard to imagine that this wouldn’t have a ripple effect on prices across the board.
“Converters in Mexico and Canada, for instance, could import Chinese aluminum foil without paying the sky-high duties and then export their products into the U.S. under the North American Free Trade Agreement.”
If this were to happen, it would bring prices back down on foil-based products. However, this entirely unnecessary chain of events would have the result of damaging one industry to protect another that can barely keep up with its existing business.
Tax reformers rightly argue that high American corporate tax rates encourage companies to leave the US or to not enter at all. It is strange that this same insight is not applied to tariffs.