US tariff war hurts home industries, world trade

Dan Steinbock
It is a dangerous policy move. It will result in rounds of tit-for-tat retaliation. And it could undermine the fragile recovery that the world economy currently enjoys.
Dan Steinbock

THE coming new US tariffs suggest that the Trump administration is willing to subsidize American steel and aluminum, even at the expense of far bigger US industries — and world trade.

Recently, US Department of Commerce recommended imposing heavy tariffs or quotas on foreign producers of steel and aluminum in the interest of national security.

Trump is likely to invoke Section 232 of the 1962 Trade Act, which allows the president to impose tariffs without congressional approval.

He must respond to the reports by April 11 and 19 for steel and aluminum, respectively.

Understandably, China reserves the right to retaliate. While the proposed measures extend from broad adjustments that involve many countries to targeted adjustments that focus on a few countries, the rationale of the suggested figures is fuzzy and ultimately undermined by geopolitical considerations.

For steel, the Commerce Department recommends three options.

• The US could introduce a global tariff of 24 percent on all imports.

• Another option would be a tariff of 53 percent on steel imports from 12 countries, with a quota on steel imports from other countries equal to their 2017 exports to the US.

• In the third option, a quota could be enacted on steel products equal to 63 percent of each country’s 2017 exports to the US.

Reportedly, Trump is now considering the first option: a global tariff of 24 percent on steel imports.

In aluminum, the Commerce Department has another three recommendations.

• The US could impose a 7.7 percent tariff on imports from all countries.

• The second option is a 23.5 percent tariff on aluminum products from China, Russia, Venezuela and Vietnam, with a cap for all countries at 2017 import levels.

• The third option is an aluminum import quota on all countries of 86.7 percent of their 2017 imports.

Reportedly, Trump is considering a 10 percent duty on all aluminum entering the US, which is more than two percentage points higher than the Commerce Department’s first option.

They would not focus on the biggest steel or aluminum importers in America, but slap broad sanctions against all importers that have a major deficit with the US.

Nevertheless, Trump is given substantial geopolitical leeway, which permits him to undermine any semblance of multilateral economic cooperation and to play targeted countries against each other.

In his presidential election campaign, Trump targeted those economies with which America has the largest trade deficit. To legitimize a trade offensive, which has a highly questionable legal basis, he is starting by focusing on steel, but is expanding to aluminum.

The ultimate objective is to target America’s deficit partners, including China, Mexico and Japan.

The White House seems to be willing to risk its economic and strategic cooperation with China, undermine ties with its NAFTA partners, alienate its European North American Treaty Organization allies and undercut alliances with the rest of its trade and security partners in Asia.

It is a dangerous policy move. It will result in rounds of tit-for-tat retaliation. And it could undermine the fragile recovery that the world economy currently enjoys.

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group.


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