Killing Jobs is the Wrong Way to Get Tough on Trade

In the long run, we’re all dead — and Republicans’ idea to hike taxes on foreign-made goods and cut them on American-made goods may be a good idea. In the short run, it means hundreds of thousands of job losses at stores that rely on imported goods.

No, retail jobs aren’t great — but we’ll miss them when they’re gone.

President Trump ran for office on supporting good American jobs, particularly in manufacturing. That means relying less on the imported cars, toys, clothes and electronics that Americans buy.

To that end, he supports some sort of tax on imported goods. During the campaign and after he won, he suggested 35 percent. Last week, his staff spoke approvingly of the 20 percent tax congressional Republicans suggest.

The idea is that companies of all sorts would respond to the tax by making more products in the United States. This would help correct a real crisis: We currently import half a trillion dollars more every year than we export.

Fine — except: 16 million Americans have jobs selling mostly imported goods.

Most people who work at a department store, clothing store, shoe store, car dealership or phone store sells something that was made somewhere else, or of imported parts.

It would be one thing if the retail industry were thriving and able to handle the price increase such a tax would mean. But it’s not. Macy’s said after Christmas it would close 100 stores. Sears is closing 150 stores. Malls are going into foreclosure because their owners have no tenants.

“If you look at what’s happening, people are trading down,” says Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment-banking firm.

The 25 percent of Americans who have no savings at all and the 40 percent of Americans who have no retirement savings shop only at deep-discount stores.

Stores at all price levels would have no choice but to pass the new tax onto consumers. Even a 5 percent price rise “would be noticeable” and “make a difference” in sales, Davidowitz says.

Walmart is already complaining about the prospect of a new tax — but a giant like Walmart knows how to be efficient, and will survive. Less-efficient retailers, including the still-surviving smaller stores, would fail.

Everyone, though, will end up cutting jobs. And though front-line retail workers don’t make much above minimum wage, the industry, with managers and other well-paid staff included, doesn’t pay as badly as people might think: The average hourly wage is nearly $18. Walmart is cutting 1,000 headquarters jobs in Arkansas starting this month — many of them good-paying careers.

And a minimum-wage job is better than no job, especially since working at all makes poorer people with children eligible for $2,500 in annual tax credits, on average, that they wouldn’t otherwise get.

But won’t people who get laid off from bad retail jobs get good factory jobs instead? Don’t count on it.

The country has 12.3 million manufacturing jobs. So to replace lost retail jobs, manufacturing would have to grow far faster than the retail industry shrinks. Plus, factory workers are more efficient than retail workers — which is partly why they make more.

Consider: Ford, GM and Fiat have all said that they’ll create 4,000 US jobs in the next few years. But Macy’s alone is cutting 10,100 jobs, including lots of management jobs.

And that’s right now.

As for Amazon saying it will add 100,000 jobs? If it keeps taking business away from less efficient competitors, they’ll have to cut far more than 100,000 jobs in return. One huge department store can have “1,000 people working in it,” says Davidowitz.

Trump and the congressional Republicans who have decided they like his trade principles better than theirs aren’t wrong on the reasoning behind the proposed tax: We do need to create better jobs here. But it’s small-c conservative to try to do that without directly harming a critical industry in the meantime.

Congress could cut taxes on exporters without raising them on importers. Sure, that would require more national debt — but better to borrow now so that adding one job doesn’t mean simultaneously subtracting one.

This piece originally appeared at the New York Post

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Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal. Follow her on Twitter here.

This piece originally appeared in New York Post