However you may choose to look at them, tariffs are a damaging economic tool, one of the most misguided economic policies a free economy can pursue. Tariffs are a tax, one that hinders free trade, distorts markets and ultimately artificially increases costs for consumers. The argument for the imposition of tariffs is often made under the euphemistic guise of “protection,” but in reality, as Milton Friedman wrote in Free to Choose  “‘protection’ really means exploiting the consumer.”

The Section 232 tariffs imposed under the Trump administration are no different. President Donald Trump may have accomplished a lot of things, including reasonable deregulation and a more sane domestic tax policy, but one thing he got very wrong economically was his love affair with tariffs. The 232 tariffs were imposed on a number of commodities, including aluminum and steel, under the auspices of “national security.” But all imposing a tax on these imports has done is contribute to their soaring costs.

Take aluminum for example. Before 2018, the year the 232 tariffs were put in place, aluminum was trading at roughly $1,600 per ton. Now it is trading at $2,300 per ton. Some of that is a factor of the general inflation that profligate public spending has caused, but a large percentage is directly due to taxation of aluminum imports. Indeed, a report by the U.S. International Trade Commission found the tariffs caused domestic aluminum prices to climb by 1.6%, while reducing imports by 31%. 

The problem with this is we simply do not produce enough aluminum domestically to meet demand. No amount of taxation on imported aluminum is going to change that. Since we do not produce enough domestically, a tariff on imported aluminum merely reduces the supply even further, causing the price to go up. This does two things: adds to the financial burdens of manufacturers and businesses that need to buy aluminum, and further compounds our already problematic supply chain constrictions.

Though businesses of all sizes are impacted by this, it is small businesses that bear the brunt of the economic pain. It is hard enough for large businesses to have to figure out how to shoulder these cost increases, delays and supply restrictions; but small businesses are the ones that can least afford to absorb any of these added costs and shortages. Generally, of course, it is the consumer who ultimately pays, but there are those businesses out there that are small enough, or just starting out, that are not afforded the ability to readily pass along costs by increasing their prices, and still stay in business.

The increased costs imposed by tariffs have a downstream impact on industries that rely heavily on aluminum. The primary one that comes to mind is the beverage industry. The Beer Institute reports aluminum represents the single largest input for American beer manufacturers; in 2020 alone, U.S. brewers purchased more than 41 billion cans and bottles. The Institute conducted a study which found that since they were imposed in 2018, the American beverage industry has paid $1.8 billion directly in Section 232 tariffs on aluminum imports.

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This impact is not isolated to major manufacturers. Every small brewery, like the ones we find dotting the Denver metro area and towns all across the state, is affected by this. These are businesses that have already had to fight to survive, first through the pandemic restrictions, then with the crippling costs of inflation, worker shortages and supply chain chokeholds. Adding an extra cost by taxing their most significant input makes no more economic sense than any other free market restriction.

It is not just breweries and beer who are impacted. Dozens of industries, including agriculture, construction, aerospace and defense, are facing increased costs and decreased production due to tariffs. This is a huge cross section of Colorado’s economy.

Milton Friedman once wrote “ever since Adam Smith there has been virtual unanimity among economists, whatever their ideological position on other issues, that international free trade is in the best interest of the trading countries and the world.” Congress needs to repeal these tariffs which are doing far more economic harm than good. Senator Mark Warner, a Virginia Democrat, teamed up with Sen. Pat Toomey, a Pennsylvania Republican, last year to advance a bill to do just that, and return the authority for imposing tariffs from the executive to the legislative branch. Colorado’s Congressional delegation should get behind a similar effort this year, for the good of our state, our country and the free world.

Byron Pelton is Colorado State Senator representing Senate District 1 comprising several rural northeast Colorado counties.