This is the story of the boy who cried wolf.
Well, really, hes a spoiled brat.
And, because hes in good company, hes getting away with murder.
At issue is a New York-based hedge fund, One Rock Capital Partners, which in 2016 acquired a paper mill in the state of Washington, North Pacific Paper Co.
And no, its not a logical match, but hedge funds these days are making so much money theyll invest in anything.
In short order One Rock discovers the Canadians have a corner on the newsprint market for one reason in particular. They have more trees.
Tons and tons more trees. Plus Canadas rail system makes their transport more affordable and they have more water for hydroelectric power.
So, naturally, One Rock complains to the U.S. Department of Commerce that Canadian producers have an unfair advantage and it agrees in March to impose a tariff up to 32 percent on Canadian newsprint.
And now this newspaper that you may be holding, is considerably more expensive to produce because a New York hedge fund has cried wolf at what it deems are unfair trade practices.
No matter that in the production of newsprint, Canada dwarfs the United States, which, in its defense, concentrates its energies on more profitable paper products. In regards to newsprint, there isnt enough produced domestically to meet demand. So its not that U.S. newspapers prefer the Canadian product, but its what is the most available, and hence economical for not only the industry but also for U.S. consumers.
Higher tariffs wont propel U.S. paper companies to switch to newsprint. Nor will the protectionist policy serve to protect the bulk of our U.S. mills, which, by the way, have kept mum in this debate, knowing full well it would only serve to bite the hand that feeds them.
For a newspaper, newsprint is its second most expensive cost, after payroll. A 30 percent hike in such a line item cannot be simply absorbed.
So now, weve joined the club of the hundreds of other U.S. businesses who are suffering from the misguided efforts of the Trump administration who, in its zeal to protect U.S. businesses by raising tariffs on foreign goods, is having the opposite effect.
The increased tariffs on aluminum and steel imports, for example, create more harm than good. Thats because, like newsprint, demand outstrips supply. Far more manufacturers rely on steel and aluminum than what the handful of U.S. industries can provide. So now U.S. manufacturers are having to pay for higher-priced imports.
On the opposite side of the equation is U.S. agriculture. We produce far more than we consume, which is why charging more for U.S. exports is a death knell to our farmers and ranchers.
