Rather than start a trade war, let's help more Americans adapt and thrive, says former Commerce Secretary Penny Pritzker

  • The president's proposed tariffs and trade war threats will damage the U.S. economy and cause significant job losses.
  • The administration should replace the ineffective Trade Adjustment Assistance program with a better system that will facilitate workers' ability to move between jobs, across sectors and communities.
  • Job-driven programs with a proven record of success should be given more funding.
Penny Pritzker
Thierry Charlier | AFP | Getty Images
Penny Pritzker

One of the most heart wrenching moments in my service as U.S. Commerce secretary was in the fall of 2016 in Lorain, Ohio.

I met with steelworkers whose lives and livelihoods were flipped upside down by years of overproduction and subsequent dumping of steel by the Chinese on the global market. This action created a glut worldwide, causing a crash in steel prices. Workers in Lorain, along with many other communities across America, felt this massive shock as thousands were laid off.

There is not a day that goes by that I don't think of the significant pain those steel workers had the courage to share. Thus, I understand the president's desire to find clear and urgent solutions to help protect American workers from foreign competition.

But the reality is that the president's call for tariffs of 25 percent on steel and 10 percent on aluminum, or threats of a trade war, will do exactly the opposite. These moves would cause real damage to our economy and job losses for countless Americans. No doubt some jobs will be saved for producers of steel and aluminum, but these gains will be offset by more jobs lost elsewhere across the nation as prices on everything made from steel and aluminum will rise, making it impossible for U.S. workers to compete on a global scale.

We've been here before. In 2002, President George W. Bush imposed tariffs of up to 30 percent on imported steel. The result of these tariffs drove up the price of U.S. products made with steel by as much as 40 percent. Studies showed they cost our economy up to 200,000 jobs for Americans who manufactured those products. That figure included roughly 10,000 in my home state of Illinois, 11,000 in Ohio, 10,000 in Michigan, and 8,000 in Pennsylvania.

It's no wonder then why the Bush administration reversed course on this policy just 20 months later, removing the tariffs after seeing their harmful effects. The president would be wise to heed this lesson.

Instead of confronting China head-on to reduce its excess production, the administration wants to misdirect our policy firepower and take out this frustration instead on our allies when we most need their help. Contrary to the goals the president wants to achieve, these tariffs will have a limited effect on China because much of the steel and aluminum we import comes from important allies such as Canada, South Korea, Brazil and Mexico.

Rather, the president should double down and work with the European Union, Canada, Japan, South Korea and others to put more pressure on China. This multilateral approach is one we pursued in the Obama administration to address those hurt by China's mercantilist economic policies and its failure as a market economy – not just in steel and aluminum, but in other key sectors such as semiconductors.

Our allies' anger is hitting a fever pitch as leading officials in the EU and elsewhere are threatening retaliation against the president's proposed tariffs. The U.S. could, in turn, face new tariffs on exports such as soybeans or planes or cars, to name just a few. Expect more of this.

Stepping back, however, we have to be honest with the American people. Far too many people feel left behind by the impacts of technology, automation and globalization. Neither trade wars nor tariffs will help in this regard, however. In fact, they will only leave more Americans further behind.

We have failed as a nation for more than three decades to develop a robust strategy to create more inclusive economic growth, arm American workers with skills they need to adapt to technological advances and modernize our safety net for 21st century work. I believe this is the central economic challenge of our time.

With the world changing this quickly, we cannot know what the future will look like just a few short years from now, let alone decades ahead. But we can put in place a system that truly prepares Americans of all ages to succeed in a competitive 21st century economy.

Here are some things we should do, among others:

  • Replace the decades-old Trade Adjustment Assistance program, which provides too little support and often fails to provide displaced workers with the support they need. An improved system must include better support to facilitate workers ability to move between jobs, across sectors and communities if need be throughout their careers, with the requisite life-long, affordable learning to help them adjust to powerful changes in our economy and improve their skills.
  • Instead of cutting federal workforce training, we should double down on job-driven programs with a proven record of success, providing more funds and support for apprenticeships.
  • We can better harness our data capabilities, through government-business cooperation, to help more Americans develop smart, strong career paths and better link them to employers.
  • Governments at all levels – federal, state and local -- should expand the earned income tax credit, and build a system of portable benefits so that retirement, sick leave and other benefits are available to all workers in our growing "gig" economy, not just traditional full-time workers.

A comprehensive workforce strategy is even more imperative given the fact that U.S. government spending on training is lower as a percentage of our economy than all but two OECD countries. Moreover, the U.S. private sector has reduced spending on training by roughly one-third over the last two decades.

Of course, there is no one single remedy to help more people adapt and thrive. While tariffs and bellicose rhetoric may make some feel good in the short term, they do nothing to ward off the challenges of Chinese competition or technological disruption in the long-term.

Yet, as a businessperson who had the high honor to serve in the Cabinet, I know we can do better. We must be willing to do the hard work to apply real political and policy muscle – at all levels -- to modernize our education, workforce and safety net systems to meet this test.

This is a defining moment – much like when our country created a public education system during the transition from an agrarian to an industrialized society. This comprehensive, generational approach is the only real answer to create greater opportunity and prosperity for all Americans, whether they hail from Lorain or any other community across our country.

Penny Pritzker is chairman and founder of the investment firm PSP Partners and was the 38th U.S. Secretary of Commerce.

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