Butler Center's Mansour Speaks to WRBL-TV about New U.S. Tariffs

With the U.S. imposing a 25% tariff on imports from Canada and Mexico, as well as a 20% tariff on imports from China, local consumers are concerned about the future of the Columbus area economy. To discuss some of these issues, WRBL-TV reporter Michelle Jennings visited the Butler Center for Research and Economic Development to speak with Turner College economist Fady Mansour. During the interview, Mansour reported that there may be some positive effects from the new tariffs. “We may see a stronger dollar. The stronger dollar usually brings prices down. That’s a deflationary force,” Mansour stated. “We may see investment in technology. That’s an opportunity for job growth.” Mansour also explained the Mansour says the tariffs could also serve as a means to decrease U.S. imports as a solution to reducing the budget deficit. “One problem we have here is we have fiscal deficits, we have budget deficits and over the long run, that’s not sustainable. We need to manage, we need to reduce the deficit,” he stated. However, Mansour also informed Jennings that these tariffs leave lots of uncertainty which could end up slowing down the economy. “Consumers don’t know if they should buy now or wait,” Mansour says. “Investors don’t know where to go so there is no direction. That’s the big problem. The second piece here is if you don’t know if investors are hesitant and customers are hesitant. You have lower demand. Eventually, this would be translated into job cuts.” Due to this uncertainty, Mansour explained that it is hard to determine if the country could go into a recession. “You have one force that push up inflation and another slowdown in the economy that will bring inflation down. How much or which force can prevail? No one really knows,” Mansour added. He relayed to Jennings that 45,000 people work between manufacture and retail in Columbus. He says cost will be higher in these two industries. He explained that the only way to reduce costs is to cut jobs. Alabama has a bigger agricultural base, and it’s expected to be more affected by the agricultural sector. Mansour added that small businesses suffer from these tariffs. “Think about the big businesses. They have the resources to invest in technology to reduce this cost. Small businesses don’t have this advantage. They always lack resources. They need support. So, I think big business . . . they can manage this kind of exogenous shocks,” Mansour pointed out. “Big business[es] have the resources to manage the inventory, the know that things will be more expensive. There will be tariffs . . . they can manage to have more inventory from these goods. Small businesses can’t,” Mansour stated. “The tariff is a tax,” he explained. “You will see higher prices on the other side when you have higher prices and the higher costs for goods . . . you have higher cost production and eventually business will try to manage this higher cost by laying off people.” Mansour says its uncertain if these tariffs will lead to a deflation. “You have one force that push up inflation and another slow-down in the economy will bring inflation down. How much or which force can prevail?” says Mansour. “No one really knows . . . it’s very difficult to decide on the net effect.” “If you start to see a slowdown, economic slowdown, then you start to see a lower demand, the prices will come down . . . that’s a deflationary scenario,” Mansour explained. “You will experience some unemployment. To start to manufacturer of things that we never manufactured here before . . . so you start to build factory or to start to produce these things, it takes time, so you have unemployment and you have a strategy to employ them, but that takes longer,” Mansour added. “You have resources to employ…then the main goal was to hire or to employ our resources, which is our labor, but it takes longer . . . to hire, to build factories and to start producing what we never produce to hire this surplus of labor,” Mansour stated. “We know that trade creates value and increase efficiency, so tariff in general is a bad concept, but if you target certain products, you start to see a more efficient economy,” Mansour explained. “Tariffs may serve this purpose, decreasing imports, reducing the budget deficit will benefit the county, would benefit the people, but it will create economic slowdown. You cannot have economic growth. Well, you have physical contraction. You still have to exit the recession economic slowdown, some job cuts, so again . . . the problem with them is the uncertainty.”