Trump’s tariffs threaten trade war

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President Trump’s recent imposition of tariffs on US imports of aluminium and steel have, in true Trumpian fashion, divided the United States. Very few economists stand behind Trump’s decision to take a protectionist stance on global trade, and many warn of the dangers of inciting a trade war with China.

President Trump has long been critical of the state of US trade. As far back as the 80s he expressed discontent with the impact that Japanese car and electronics imports were having on the US economy, and his platform for the 2016 election was consistently critical of Chinese trade policies, as well as other trade agreements the US has been involved with, such as the North American Free Trade Agreement (NAFTA).

Immediately after being elected, Trump pulled America from the Trans-Pacific Partnership, a proposed trade deal which aimed to reduce barriers to trade among many nations including Japan and Australia. In the last few months he has furthered his commitment to protectionist economic policy by erecting tariffs on solar panels and washing machines in January, followed more significantly in March by a 25% tariff on imports of steel and a 10% tariff on imports of aluminium. This was met with staunch opposition, including from Trump’s chief economic advisor Gary Cohn, who resigned over the dispute.

The President’s justification for the tariffs was to protect the US steel and aluminium industries who otherwise would not be able to compete with cheaper competition from countries such as China. Of particular concern to Donald Trump was ‘national security’, as if the US steel industry were to collapse, the nation would then be reliant on imports of the vital military resource.

The tariffs are also in line with Trump’s ‘America First’ doctrine, as in the last two decades the US steel industry has shrunk by 35%, while the aluminium industry cut 60% of its jobs between 2013 and 2016. The White House views these jobs as having been ‘pushed out’ by foreign imports, and that this policy is a defence of American workers.

However, Defence Secretary Jim Mattis noted that US military demand for steel and aluminium can be met with only 3% of domestic production, and one of the US’s largest suppliers of metal is Canada, which are highly unlikely to halt exports.

Critics also worry that these policies will ultimately increase costs for consumers and businesses, making the average American worse off. There is also fear of retaliation from countries whose businesses suffer from the US tariffs, which may lead to a back and forth of increased tariffs, otherwise known as a trade war. Despite Trump’s confidence that “trade wars are good, and easy to win”, there are very few who welcome to prospect.

Trump did relent to opposition pressure somewhat by granting exemptions from the tariffs for certain countries, among which are Canada, Mexico, and the European Union, however his policies mark a departure from the US’s traditional stance on trade, and recent suggestions to impose further tariffs on $60 billion of Chinese goods over intellectual property disputes show that the president intends to continue to stray from the status quo.

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