Trump’s ‘Smart’ Steel Tariffs Don’t Make Economic Sense

 In U.S.
President Donald Trump’s long-anticipated tariffs are finally here: 25 percent on imported steel and 10 percent on imported aluminum, with a formal announcement on the measures to be made next week.

The White House has argued that the tariffs would punish China for unfair trade practices and help American blue-collar workers afflicted by decades of manufacturing job losses and wage stagnation. “We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!,” President Trump wrote on Twitter on Thursday. But business leaders and economists from across the ideological spectrum question how much good Trump’s tariffs would do—and whether they might even backfire, raising costs for American consumers, hurting American exporters, straining American economic relationships around the world, and ultimately slowing down growth.

That is not to say that the tariffs do not have a constituency among certain manufacturers, or that they are not meant to address real and painful changes in the American economy. Steel production has fallen to 82 million metric tons a year from nearly 100 million a decade ago, with three out of four domestic aluminum smelters shuttering over the past few decades. That has meant thousands and thousands of job losses. At the same time, foreign producers have ramped up production, pushing down prices and leading to increased American imports.

The issue, the Trump administration has argued, is not just one of jobs, wages, imports, and exports. It is also one of defense strategy: The U.S.’s reliance on imports leaves critical industries vulnerable to potential embargoes and trade actions by its enemies.

But trade experts see a number of problems with the White House’s argument for instituting tariffs on security grounds. Trump himself has repeatedly mentioned China’s trade practices as justification for the tariffs, for one. And the vast majority of  the U.S.’s imports come from strong allies: Canada, South Korea, Mexico, Germany, Japan, and Brazil all export more steel to the United States than China does. “There is no question that steel and aluminum, materials used in the production of weapons and military systems, are vital for America’s military superiority,” a group of conservative think-tank scholars argued in response to then-potential tariffs in late February. “But it is not realistic to expect that foreign producers would withhold supplies in the case of a national security emergency.”

The flimsiness of Trump’s justification raises the risk of retaliation by the United States’ trading partners, many of whom have lobbied against the tariffs since the earliest days of the Trump presidency and are expressing their frustration with the tariffs now. Trade experts expect tit-for-tat actions, meaning lower sales for American businesses abroad. “If the United States goes down this path for steel and aluminum, there is little to prevent other countries from arguing that they too are justified to use similar exceptions to halt U.S. exports of completely different products,” argues Chad P. Bown of the Peterson Institute for International Economics, a Washington-based think tank broadly supportive of free trade. “Because this leads to a downward spiral and erodes meaningful obligations under international trade rules, justifying import restrictions based on national security is really the ‘nuclear option.’”

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