US 'shooting self in foot' with protectionist steps

Edgardo Loguercio
This policy is very dangerous for Americans themselves, because it ends up damaging what is most important in trade ties, which is trust
Edgardo Loguercio

NEWLY imposed tariffs on imported metals and other protectionist measures taken by US President Donald Trump could backfire, said Brazilian economist Cesar Bergo of the Federal Economic Council. Far from shoring up national industry, “the United States is shooting itself in the foot,” and impacting world trade, said Bergo, who also teaches at the University of Brasilia.

Last month, Trump unveiled steep tariffs of 25 and 10 percent on steel and aluminum imports, respectively, and tariffs on up to US$60 billion on imported Chinese goods. He later exempted a few countries from the onerous taxes, including Mexico, Canada and Brazil, but many observers worry the measure will disrupt international trade and, by extension, global economic growth.

On Tuesday, the US administration proposed a list of products to be subject to additional tariffs, covering Chinese exports worth US$50 billion with a suggested tariff rate of 25 percent.

“If the US maintains this conservatism regarding imports, it is going to reduce trade volume and the whole world ends up losing,” said the economist.

Trump seems to be living up to his campaign pledges to protect US workers through protectionism, “but what’s going to happen is the measures are going to add to the cost of products in the US market,” predicted Bergo.

Domestically, the tariffs are set to push up costs along the entire automotive productive chain and in household appliances, he said. Long-term US trade relationships with key partners are also going to suffer as a result, said Bergo. “This policy is very dangerous for Americans themselves, because it ends up damaging what is most important in trade ties, which is trust,” he said.

“Currently, with globalization, this places the United States on the margins, not just in trade matters. It adopted the same attitude in climate matters by withdrawing from the Paris agreement,” he said, adding “this foreign policy is isolating the United States, with attitudes that are quite dangerous.”

Isolationism

As isolationism runs counter to traditional US foreign policy, it remains to be seen to what degree Trump’s proposals will be implemented, said Bergo.

“Historically, the United States and (former president Barack) Obama himself worked a lot on opening up and strengthening some partnerships. I think the current US administration ... is adopting a somewhat erratic stance. I think time will show it is not taking the right path and will have to backtrack in some cases,” the economist said.

Trump’s protectionism appears to be distinctly directed at China, a country that has seen strong development and growth in recent years, with a thriving steel industry and technology sector, said Bergo.

“It seems to me that when the US adopts a stand against steel, aluminum and high-tech goods, it is seeking out this target, that is an argument with the Chinese government,” Bergo said. “China produces 830 million tons of steel and ends up being one of the countries most affected by this US policy.”

In contrast, the United States does not make enough to meet its domestic demand, and has to import the metal.

“I think the US and China will have to sit down and talk. China may suffer a negative economic impact on the one hand, but on the other it has huge negotiating potential since China is the main creditor of the US,” said the economist.

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