Cascading Protection

With little fanfare or reporting, Trump issued a Proclamation Adjusting Imports of Steel and Aluminum Products.

I picked this story up courtesy of a Tweet Thread by Chad P. Bown.

  1. On Friday night, Trump admitted that US companies whose costs he has raised – by imposing tariffs on the metals they need – are no longer competitive with foreign firms. Because of his policies, they too must now be shielded from trade...
  2. Trump announced he was expanding the product coverage of his national security tariffs on STEEL and ALUMINUM to include "derivative" goods that use steel and aluminum as an input - eg, steel nails or aluminum bumpers.
  3. Imports of those "derivative" products have increased, in part because US companies have had their COSTS go up because of Trump's tariffs on steel and aluminum. In Econ 101 terms, the cost increase shifts the US supply curve (DS) to the LEFT. That makes imports INCREASE.
  4. Economists call this "cascading protection." Trump's tariffs on inputs lead to higher costs for US companies making the downstream products, and this results in a clamoring for ADDITIONAL trade protection for those products. This was all completely predictable.

Results Speak For Themselves

  1. GDP Internals show business investment contraction: Ignore the Headline, Real GDP is Much Worse Than It Looks
  2. How to Buy an Election - Durable goods orders excluding defense were -2.5%: Of Durable Goods Orders (and How to Buy an Election)
  3. Freight shipments collapse: Cass Year-Over-Year Freight Index Sinks to a 12-Year Low


Cheerleader Silliness

Meanwhile, people cheer Trump for shrinking imports. That was the biggest boost to 4th-quarter GDP.

However, were it not for huge government spending and absurd measures of inflation, it would be clear there is nothing to cheer about. GDP would have been 0.22% (see link number 1).

And by the way, imports always decline in recessions.

Addendum - Updates From Chad Bown

Mike "Mish" Shedlock

More Tariff Madness: Trump Targets Steel, Aluminum

Trump administration ponders a global tariff of at least 24% in a mad effort reduce the trade deficit and save jobs.

Triple Tantrum: Stocks Sink, GOP & EU Outrage on Trump's Steel Tariffs

Trump announced sweeping new tariffs on steel and aluminum. The stock market threw a tantrum and so did GOP leaders.

Trump Tariffs Help Sink US Steel: Investigating a Trump "Big Win"

US Steel wanted Trump to put tariffs on Chinese steel imports. The company is not at all pleased with the results.

Canada Might Nix Trump's NAFTA Deal Unless He Stops Steel Tariffs

Trump's trade deal scorecard might drop to zero unless Trump halts tariffs on Canadian steel and aluminum.

Foolishness of Trump's Steel Tariffs in One Image

Trump hopes tariffs will bring back steel manufacturing jobs. It won't happen.

How to Not Sell Cars: More Steel Tariffs Coming Up

It is extremely foolish to think steel tariffs will increase employment or reduce the deficit. But here we go anyway.

Pandora's Box: Another Look at Steel Tariffs

Even if one foolishly believes tariffs can be a good thing, Trump went well beyond any semblance of rational thinking.

Trump Surprise Tweet Restores Steel and Aluminum Tariffs

President Trump lashed out at Brazil and Argentina in a surprise Tweet today restoring metal tariffs.

Make American Steel Great Again Backfires In Trump Lawsuit

JSW Steel had nothing but praise for Trump's steel tariffs. Now the company has filed a lawsuit against the Trump admin.