Infrastructure Comes Home to Roost

Cuts and tariffs are not the best way to approach solving America’s infrastructure woes

by Jack Simpson

Can you believe we’re already a quarter of the way through 2018? And what a wild one it has already proven to be. Our team has poured our effort into bringing you this very special edition of American Infrastructure magazine. I say very special as it is our annual Sourcebook, which combines all of our usual content with detailed lists of businesses, services, and governmental agencies, as well as supplementary features. It’s been a doozy.

Last issue I touched on President Trump’s infrastructure plan. Now, just two months later, it seems as if it has already been abandoned. I guess the President has more pressing matters to attend to. I suppose that’s for the best, though, as his “$1.5 trillion” plan never did amount to anything more than a $200 billion injection intended to kickstart some sort of nation-wide P3 feeding frenzy. Never mind the fact that that $200 billion would have come on the back of the $178 billion that had already been cut from infrastructure funding in order to pad all those tax cuts.

In an eerily similar vein, just recently, on March 21, Congress squeaked through a massive, last-minute $1.3 trillion plan to avoid yet another government shutdown. How does this 2,232-page funding bill relate to infrastructure? Well, they managed to set aside a cool $21.2 billion. Not quite the $200 billion we heard so much about, but hey. Oh, and I shouldn’t neglect to mention that this $21.2 billion comes at a cost. The bill also proposes as much as $52 billion in cuts to transit-oriented grant and economic recovery programs, not to mention funding for Amtrak and Washington’s Metro system.

Anyway, “plans” aside, plenty else has happened in the infrastructure world that worthy of discussion. One other such topic – or three, rather – is tariffs. Since taking office, Trump has seen fit to issue three rounds of so-called “protectionist” tariffs – all of which have much greater implications than may initially be apparent. The tariffs that have been levied so for have been on: lumber; solar; and steel and aluminum. Since lumber and solar aren’t necessarily pertinent to infrastructure, I’ve set those aside for discussion in our sister publication, Builder and Developer, but you better believe I’m going to get into it with steel and aluminum.

On March 8, just after 107 Republican members of the Republican- controlled House of Representatives had finished begging him not to, Trump formalized his latest round of broad, sweeping tariffs, this time on steel at 25 percent and aluminum at 10.

Students of history may recall that President George W. Bush also imposed tariffs on steel back in March of 2002 in order to protect U.S. steel makers from what was seen as a detrimental surge – so-called dumping – in cheap steel imports. They didn’t go so well. Shortly after the decision, both the WTO and the EU spoke out against it, announcing retaliatory tariffs of their own. But more damning than the international response was the one at home. Immediately after Bush’s tariffs were announced, the S&P 500 plunged 30 percent.

However, a key difference today is that both Canada and Mexico were exempt from Bush’s tariffs at the get-go (along with several other allied and developing countries) due to the penalties that the U.S. would incur under NAFTA. The nuanced, multilateral realities of a flat tariff, such as the details of existing trade agreements like NAFTA, perhaps did not occur to Trump when he tossed out his proposal, only entertaining exemptions for “real friends”. It’s been made abundantly clear how Trump feels about Mexico, but the slight at Canada came as a bit of a surprise. I wonder who he considers a real friend to the U.S. Russia, perhaps?

And the construction industry is already hurting. Early interviews and reports from industry personnel indicate that the cost of steel has already risen by as much as 10 percent. We can only speculate as to what the full impact of the tariffs will be, but suffice it to say it won’t be, say, great. The simple fact is that these tariffs only help the companies that melt and produce their own steel and that those producers are the minority. In an increasingly globalized and interdependent world, one power making a unilateral move without considering the full weight of it is beyond irresponsible.

Already, we’ve seen the results of such a move. The air is thick with word of trade wars. China has responded to Trump by announcing its plans to match him, levying $50 billion worth of tariffs on 106 U.S. products. China is set to place a 25 percent tariff on aluminum, pork and soybeans, as well as a 15 percent tariff on apples, almonds, and other agricultural goods. It’s worth mentioning that these tariffs would devastate the agricultural industry. How can one justify the illusion of sparing the steel industry while brushing away the reality of leveling the agricultural industry? Last I checked, farmers need jobs, too.

Today, we face the same infrastructure woes we have faced for years. The difference is we will have less steel and aluminum to build with, and what we do have will cost more. With less money coming in – and less steel to hold it together – it’s only a matter of time before the tent collapses on the circus.

Jack Simpson is the Editor at American Infrastructure magazine. He may be reached at jack@penpubinc.com.

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