President Trump signed proclamations Thursday placing tariffs on steel and aluminum imports in a highly anticipated move that tracks with his consistent promises on the campaign trail to take an “America First” approach to trade agreements that he said disadvantaged the U.S.
The president agreed to temporarily exempt Canada and Mexico from the new tariffs – 25 percent on imported steel and 10 percent on imported aluminum – and said he might later exempt other allies. He said the tariffs will go into effect in 15 days. President Trump said he wants to see how the renegotiation of the North American Free Trade Agreement (NAFTA) progresses before deciding whether to apply the tariffs to Canada and Mexico.
Unfortunately, the president’s hardline protectionist agenda on trade contradicts his broader stated goal of Making America Great Again.
Steel and aluminum are essential to the American economy – and we rely heavily on imports. The U.S. is the world’s largest steel importer, getting the metal from more than 110 different countries. Our largest trading partners in steel are Canada, South Korea, Mexico, and Brazil, which together supply about half our needs and which are important partners in trading beyond metals.
Imported steel and aluminum are used in everything from infrastructure projects, to consumables, to medical devices and airplanes. Tariffs against them will surely raise prices for consumers across the board and threaten jobs as well.
America’s energy sector, which has exploded in recent years, is particularly vulnerable to tariffs on imported steel and aluminum. More than three quarters of the steel used in pipeline construction is imported, and dollars expended on that activity largely end up in the pockets of American workers.
But while slapping tariffs on steel and aluminum imports will have a ripple effect that will burden certain industries and ultimately reach consumers’ wallets in countless ways, it could be particularly harmful to our delicate trade relationships.
Already, as trade representatives from the U.S, Canada, and Mexico continue to debate the future of NAFTA, the announced tariffs are having an effect. President Trump indicated that although Mexico and Canada are exempt from the tariffs for now, those exemptions are not open-ended.
The term “trade war” is not necessarily bilateral. President Trump’s move on steel and aluminum imports will affect many countries, not just those who send us those two metals. And although the president said he believes that “trade wars are good,” the domino effect arising from these tariffs could ignite countless retaliatory actions against the United States and other countries that would slow the entire world economy, in which case we’d all lose.
China has indicated that although it does not want a trade war with the U.S, it will not take the tariffs lying down. Zhang Tesui, China’s vice foreign minister, said that his country would “not sit idly by and watch as China’s interests are damaged,” pointing to likely retaliation in the form of trade restrictions.
A trade war between the U.S. and China would have dire consequences for countries across the globe, with few players in Asia and North America likely to remain unaffected.
The reality is that free trade is good for all of us. It enables comparative advantage, encourages innovation, increases access to higher-quality goods at lower prices, and facilitates economic growth and global cooperation.
Free trade eases inflationary pressure and encourages fairness and growth. And in the U.S, at least half of imports are not consumer goods. They are components of U.S. products that are assembled here. Keeping the prices of those inputs low creates more jobs at home and promotes economic growth.
The global economy is an intricate web of relationships, a fragile network of interdependence that is sensitive to any change. And although President Trump’s emphasis on American workers and businesses is commendable, the protectionist approach to trade he is pursuing is incompatible with his stated goal of Making America Great Again.