Trump said yesterday he plans to impose tariffs of 25 percent on steel imports and 10 percent on aluminum. However, he didn’t elaborate on the details, saying the formal announcement will come next week. In a tweet on Friday morning, the president said “trade wars are good and easy to win.”
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
Even White House insiders were caught off guard. The idea had not been “settled”; the numbers (25% and 10%) were not set in stone — or so they thought. There had been no legal analysis to accompany the announcement. No economic analysis.
There were no prepared, approved remarks for Trump to give on trade and tariffs, NBC News reports.
There was no:
No one at the following departments had been told about the policy:
— Kyle Griffin (@kylegriffin1) March 2, 2018
There are even reports that Trump was “unglued” — frustrated by other news — when he announced the plan. He wanted a war, something hje could win, so he chose a trade war (it is better than a real one, I suppose)
So the stock market yesterday took a dive of a few hundred points. It was down another 350 points earlier today.
What is responding to? Well, competition from foreign markets that import steel and aluminum. But America imports half its steel and 90 percent of its aluminum for a reason, and that reason is simply the workings of the market. If it were cheaper for companies who pay for the imports to buy these goods in the United States, they would be made in the United States. But it isn’t. Protectionists like the president claim we’re being taken by other countries, which are “dumping” their goods on us at unreasonably low prices.
As an economic concept, “dumping” describes the act of selling something at a price lower than the cost to produce it. This isn’t what’s happening with steel or aluminum. What’s happening is that it’s cheaper for these countries to produce steel at a lower price point and make a profit.
The fact they can do this is a benefit to American consumers, who pay lower prices for the goods they buy because the global market allows manufacturers and retailers to provide these goods at a more reasonable price.
But Trump is concerned about American steel workers and American aluminum workers. The problem? Let’s say this works and over the course of a decade, 150,000 more people are employed producing steel. That sounds terrific — except there are 330 million American consumers. Think of it this way: Every single person in the United States is a consumer.
And it hurts other workers. As the Wall Street Journal noted:
Mr. Trump seems not to understand that steel-using industries in the U.S. employ some 6.5 million Americans, while steel makers employ about 140,000. Transportation industries, including aircraft and autos, account for about 40% of domestic steel consumption, followed by packaging with 20% and building construction with 15%. All will have to pay higher prices, making them less competitive globally and in the U.S.
So now, with the tariffs or US-made steel and aluminum, the products that use steel and aluminum, everything from cars to soda cans, are going to get more expensive. How much more expensive is a matter of debate. But I assure you, Detroit — i.e., Michigan — is not loving this.
The National Retail Federation called the tariffs a “tax on American families,” who will pay higher prices for canned goods and even beer in aluminum cans. Another name for this is the Trump voter tax.
This is to say nothing of the retaliation — hence, the “trade war”. The economic damage will quickly compound because other countries can and will retaliate against U.S. exports. Not steel, but against farm goods, Harley-Davidson motorcycles, Cummins engines, John Deere tractors, and much more.
The EU is targeting products with political punch, revisiting a list compiled during George W. Bush-era trade disputes of symbolic American brands.
Potentially in the EU’s sights: items such as Harley-Davidson motorcycles, whose corporate headquarters is in House Speaker Paul Ryan’s home state of Wisconsin. Bourbon is another target, having enjoyed a surge in exports to the EU. Senate Majority Leader Mitch McConnell’s home state of Kentucky exported $154 million worth of bourbon to the EU, up from $128 million in 2016, according to data from the International Trade Commission.
Agriculture products such as cheese, orange juice, tomatoes and potatoes are also targets for retaliation.
So…. well done, Mr. Trump.
Oh, and there may be an insider trading problem for Trump’s friends:
A week before President Trump announced his intention to impose a 25 percent tariff on steel imports, his longtime confidant and one-time adviser Carl Icahn had already cut almost 1 million shares of Wisconsin-based crane manufacturer Manitowoc Company Inc., ThinkProgress reports. The timing of Icahn’s $31.3 million dump is suspect, because Manitowoc is a heavily steel-dependent company.
“Commerce Secretary Wilbur Ross publicly released a report on Feb. 16 calling for a 24 percent tariff,” notes ThinkProgress. “But, as the chart in the [Securities and Exchange Commission] filing indicates, Icahn started selling his Manitowoc stock on Feb. 12, prior to the public release of that report.” Icahn made the SEC filing on Feb. 22.