ASSESSING THE TOLL OF TRUMP’S TARIFFS
ANALYSIS FINDS TRADE MOVE WOULD HIT CANADA FIVE TIMES HARDER THAN CHINA
President Donald Trump set off a frenzy worthy of a primetime reality show when he made an offhand announcement last week that the U.S. will be imposing tariffs on imported steel and aluminum.
And now, the cliffhanger: Will he or won’t he actually go through with them?
As breathless as the coverage has been, the stakes are high. The most conservative estimates see hundreds of thousands of jobs lost and that will only increase as countries gear up for retaliatory measures.
As we wait for Trump’s final decision, here’s what you need to know about these trade remedies and their consequences.
HOW MUCH ARE THE TARIFFS?
The tariffs are expected to be 25 per cent on steel imports and 10 per cent on aluminum.
WHY DOES TRUMP WANT THEM?
The primary target seems to be China, which has been over- producing steel and “dumping” it on other markets. Both the U. S. and the European Union have complained about Chinese steel and introduced tariffs in the past, arguing the cheap product makes it hard for domestic industries to compete.
DO THE TARIFFS TARGET CHINA?
Trump hasn’t formally introduced tariffs yet, but he has said there will be no exclusions. That means steel-exporting countries like Canada, Mexico and South Korea — traditionally very strong allies of the U. S. — will be hit hard. That’s a big difference from U. S. steel tariffs introduced in 2016 by Barack Obama that specifically targeted low- cost Chinese steel. In fact, the U. S. al- ready has about 150 different trade remedies against steel imports, with 24 targeting China.
HOW HARD WILL CANADA BE HIT?
Total trade losses to U. S. trading partners are expected to be about $ 14 billion per year, with Canada taking the biggest hit of any country at $ 3.2 billion. China would only take a $689-million loss, according to analysis from the Peterson Institute for International Economics, which is a little more than one-fifth of the hit Canada would take.
WHO ARE THE WINNERS?
The U. S. steel industry and anyone employed by it should benefit from less competition and the higher prices that generates.
WHO ARE THE LOSERS?
Along with U. S. trading partners, there are a few immediate losers in the U. S., too. Any industry that buys steel will feel the effects of higher prices. When steel prices go up, most of these industries, like automakers, appliance makers and construction companies, will see job losses as they struggle to absorb the costs. In the past, these industries have had trouble passing the costs along and tend to cope using layoffs rather than price increases.
When George W. Bush introduced steel tariffs in 2002, one analysis found that higher prices cost the U. S. economy more than 200,000 jobs. That’s more than the total number of people then employed in the steel industry.
Other negative consequences depend on how the affected countries react. Canada said the potential steel tariffs are “unacceptable” and is reviewing its options. Other countries are considering targeting products like Harley Davidson motorcycles and Kentucky bourbon, which would precisely target Republican House Leader Paul Ryan and Senate Majority Leader Mitch McConnell, respectively.
Because countries tend to be creative in how they retaliate — in 2002, swing states Bush needed to win in congressional midterms were targeted by affected countries — it’s impossible to know who will take the brunt. But it’s safe to say the negative consequences will be far-reaching.
WHY IS TRUMP DOING IT?
The U. S. has invoked a rare national security rule, after a review by its commerce department, which argues that a threat to the steel industry is a threat to the national security. On Monday, Trump tweeted that a favourable NAFTA negotiation could exempt Canada from the tariffs, which makes the national security argument hard to swallow.
Most l i kely, Trump is eager to fulfil a campaign pledge to help an industry he says is struggling. The president has also reportedly been badgering his staff for more tariff proposals and seems to have a personal affinity for protectionist measures.
More ominously, NBC reported that Trump was angry and “unglued” when he made the decision about tariffs, which may explain why Canada — long thought to excluded from the measure — was not given an exception.
SO IS IT DEFINITELY GOING TO HAPPEN?
In a rare move, House Speaker Paul Ryan said he is “extremely worried” by the possibility of steel tariffs and there are loud opponents within Trump’s own administration.