How Trump’s tariffs could affect consumers and businesses
Here’s a close look at the tariffs and their potential to trigger a trade war and bruise the U.S. economy:
WHAT EXACTLY DID TRUMP DO?
The president said that sometime next week, he will formally announce tariffs of 25 percent on imported steel and 10 percent on imported aluminum. It’s unclear whether any countries would be exempt from what would amount to a heavy new tax on imports.
That tax would, in turn, make imported steel and aluminum more expensive for American companies and individuals who use goods containing those materials, ranging from cars to air conditioners to beer cans.
Trump had directed the Commerce Department nearly a year ago to investigate whether imported steel and aluminum posed a threat to national security. The premise is that a healthy industrial base is crucial to the nation’s military. The Trump administration has said, for example, that America now has only one smelter that provides the high-purity aluminum that military aircraft require.
Commerce last month issued its conclusion that national security concerns justified sanctions on steel and aluminum imports. Among its recommendations were across-the-board tariffs of 24 percent on steel and 7.7 percent on aluminum. Trump said Thursday that he wants even higher tariffs.
In his decision, Trump deployed a little-used weapon in U.S. trade law: Section 232 of the Trade Expansion Act of 1962, which authorizes the president to restrict imports and impose unlimited tariffs on national security grounds. Since the United States joined the World Trade Organization in 1995, it has pursued only two such investigations. On both occasions — a 1999 case involving oil imports and a 2001 case concerning iron ore and steel imports — the Commerce Department declined to recommend sanctions.
WHAT’S THE LIKELY IMPACT ON COMPANIES AND THE ECONOMY?
American steel and aluminum producers would benefit from a tax on imports and the higher prices that are likely to result.
“You will have protection for the first time in a long while, and you’re going to regrow your industries,” Trump told U.S. aluminum and steel company executives at the White House.
But there’s a flip-side to that calculation: Fewer choices and higher costs for companies that buy steel and aluminum and for their customers.
“Tariffs on steel and aluminum are a tax hike the American people don’t need and can’t afford,” said Utah Republican Orrin Hatch, chairman of the Senate Finance Committee. “I encourage the president to carefully consider all of the implications of raising the cost of steel and aluminum on American manufacturers and consumers.”
Freed of the need to compete with imports, U.S. steelmakers would likely raise their own prices. That, in turn, would force automakers to raise prices of new vehicles, although some might decide to absorb their higher costs.
“Simple supply and demand,” says Lee McMillan, a steel and aluminum analyst at Clarksons Platou Securities. “You eliminate or substantially tax a good portion of supply, and the overall price, the domestic price, rises.”
The American International Automobile Dealers Association said it fears that the tariffs would send car prices up “substantially.” U.S. auto sales plateaued in 2016 at 17.5 million vehicles a year. They fell slightly last year and are expected to dip again in 2018.
“You start throwing in higher prices from more expensive steel for automakers — that’s going to start to pile on multiple factors that could really slow down U.S. car sales,” says Karl Brauer, executive publisher for Kelley Blue Book.