The prospect of a global trade war is high and rising as U.S. Weighs Tariffs and Quotas on Steel, Aluminum Imports.
The Trump administration on Friday said it was weighing broad-based tariffs and quotas to curb imports of steel and aluminum to protect national security, though officials stressed no final decisions had yet been made and the ultimate policy could be considerably more limited.
The recommendations suggest the president choose among several options. One of them is a global tariff of at least 24% on all steel imports from all countries. Another is a tariff of at least 53% on steel imports from a dozen countries. Under the latter, targeted option, the tariffs of 53% would be applied on steel from Brazil, China, Costa Rica, Egypt, India, Malaysia, South Korea, Russia, South Africa, Thailand, Turkey and Vietnam.
The report from the Commerce Department also included, as an alternative, a quota on steel products from countries equal to 63% of the countries’ 2017 exports to the U.S.
In a White House meeting Tuesday with members of Congress to discuss the possible measures, Mr. Trump faced considerable resistance from fellow Republicans skeptical of the justification for new import curbs, and worried about the impact.
But in the wide-ranging, 50-minute discussion, Mr. Trump regularly refuted the skeptics, suggesting he wasn’t so worried about costs, and would prefer a fairly broad curb. “You may have a higher price… but you’re going to have jobs,” Mr. Trump said at one point. “To me, jobs are very important.”
The tariffs are economic madness.
The immediate casualty of this round of proposed tariffs is the US auto industry still sitting on massive inventory despite a huge hurricane-related replacement boom.
Last month, Trump put tariffs on solar panels and washing machines. Here's the irony: The Solar Companies Behind Tariff Increases are Foreign-Owned.
New Phase in "America First"
Let's recap what I said in New Phase in "America First".
Who Wins from Cheap Solar Panels?
- US consumers who buy the panels, allegedly subsidized by China.
- US companies that install the panels.
- US shipping and trucking companies that deliver the product.
- Local fast food restaurants where the installers eat.
- Gasoline stations where the truckers and installers fill their tanks.
Trade War Repercussions
Tariffs may save a handful of jobs at bankrupt US companies that cannot compete globally, but it will be at the expense of all six of the above.
The same applies in a similar fashion to TVs, underwear, and washing machines.
China may retaliate by canceling orders from Boeing or reducing soybeans imports from US farmers.
It is not going to take much to prick various global economic bubbles. A trade war with China could do it.
Not only are tariffs economical madness, mathematically they cannot reduce balance of trade issues caused by deficit spending.
Professor Steve Hanke at the John Hopkins University explained the math in Trump's Tariffs Are A Reminder He's Clueless About Trade.
Once again, the roots of this problem date back to August 15, 1971.
That is when Nixon closed the gold window, ending foreign redemption of dollars for gold.
For further discussion, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?
Mike "Mish" Shedlock