Trump’s empty talk on trade leads world down a dangerous path
The Trump administration has argued that its new tariffs on steel and aluminum imports will protect U.S. industry from China, which in recent years flooded the global market with cheap metals. It is impossible to take this argument seriously.
For starters, the tariffs will have little effect on China. That country supplies less than 5 percent of the steel and about 10 percent of the aluminum that the United States imports. Further, a vast majority of metal imports from China are already subject to tariffs put into place by previous administrations, according to Chad Bown of the Peterson Institute for International Economics.
Oddly, the primary victims of these tariffs, which are being imposed under a law that lets the president restrict trade to protect national security, will be U.S. allies, including the European Union and South Korea. Canada and Mexico will be temporarily exempted, but could still be hit with tariffs later if they and the United States fail to renegotiate the North American Free Trade Agreement. Before President Donald Trump signed orders authorizing the tariffs last week, he suggested other countries could be exempted, too, but only if they treated the United States “fairly,” including by spending more money on their own defense. “Many of the countries that treat us the worst on trade and on military are our allies, as they like to call them,” he said at the White House, flanked by steel and aluminum workers and administration officers.
More important, the Trump administration has repeatedly dropped the ball on efforts that might have succeeded in prompting China to curb production, something that would have benefited not just the United States but also allies that are now threatening to retaliate by imposing tariffs on American goods and services.
Most experts agree that China is not moving fast enough to close steel mills and aluminum smelters that it no longer needs because its economy is growing more slowly as it has gotten much bigger. The country’s
The Trump administration has repeatedly dropped the ball on efforts that might have succeeded in prompting China to curb production, something that would have benefited not just the United States but also allies that are now threatening to retaliate by imposing tariffs on American goods and services.
leaders fear that moving faster could hurt its economy, harm state-owned banks that have lent to the metal industries and create unrest among workers who lose their jobs. But experts like Eswar Prasad, an economics professor at Cornell University, say the United States, the European Union and other countries could press China to move faster to address this problem, especially if they worked together.
Characteristically, the Trump administration has displayed none of the diplomatic and economic savvy required to get China to change its policies. On Jan. 12, 2017, the Obama administration filed a case with the World Trade Organization that accused China of unfairly subsidizing aluminum producers and thus driving down global prices for the metal. But Trump’s trade representative, Robert Lighthizer, has failed to ask the WTO to convene a panel of judges to hear the case, effectively suspending it. Lighthizer’s office declined to answer questions about the case.
Perhaps Lighthizer, a trade lawyer who has represented the steel industry, did not believe the case would have been successful because he shares Trump’s contempt for the WTO, an organization the United States was instrumental in creating to help prevent trade wars. Last month, Trump said the organization “makes it almost impossible for us to do good business,” arguing that U.S. officials get to pick too few judges on its dispute resolution panels. But these assertions are belied by the fact that the United States has won nearly 86 percent of the cases it has brought before the WTO since 1995.
Another opportunity for addressing excess steel production came in talks last summer between Chinese officials and Trump’s commerce secretary, Wilbur Ross, and his Treasury secretary, Steven Mnuchin. The Chinese told the Americans they would be willing to reduce China’s steel production capacity by 150 million tons by 2022. But Trump rejected the offer. An unnamed administration official told The Financial Times that Trump wasn’t interested in striking a deal because he had already decided that he wanted to impose tariffs.
By now it should surprise no one that Trump prefers empty statements to doing the work needed to achieve lasting change. The former is easy to deliver in tweets and public pronouncements, while the latter takes patience and persistence. The president would rather impose tariffs and claim he is protecting the country and bringing back lost jobs than take the time to properly address the problem of excess Chinese steel and aluminum capacity.
The president’s approach should worry everyone concerned about a trade war or the health of the steel and aluminum industries.