Trump’s dangerous trade war
During the 2016 campaign, President Trump made his economic agenda plain: He wanted to protect American jobs by deporting immigrants, slashing regulations and protecting U.S. industry through tariffs and other trade crackdowns.
Trump spent the first year of his presidency making good on the first two promises. Now he’s finally getting around to the third — and the results could be equally destructive.
On Thursday, Trump said he would soon levy tariffs of 25 percent on imported steel and 10 percent on aluminum.
The response was immediate and negative.
The stock market fell sharply, with the Standard & Poor’s 500 index closing 1.3 percent down after Trump’s comments.
Our friends and allies around the world rebuked Trump’s announcement. The European Union is livid. Canada, Mexico, China and Brazil are all weighing retaliatory measures.
Instead of backtracking, Trump doubled down. On Friday, he said on Twitter that “trade wars are good, and easy to win.” A few hours later he added that the tariffs were just the beginning. “We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us,” Trump wrote on Twitter. “$800 billion trade deficit — have no choice!”
It’s hard to find an economist in this country who believes trade wars are good or easy to win.
It’s true that the U.S. currently imports more goods from other countries than it exports. That’s the way free trade works. As the world’s wealthiest nation, the U.S. wants access to foreign markets. In order to export our products, we open our doors to the goods produced by other nations.
Thanks to lower labor costs, different natural resources and other efficiencies, many of those other nations produce goods that are cheaper than similar items the U.S. can produce. U.S. consumers enjoy lower prices on those goods and American industry focuses on the products this country is best at producing. Everyone wins. Nobody wins in a trade war. While domestic steel and aluminum producers might hail Trump’s tariffs, industries that rely on imported steel and aluminum are much larger and employ far more U.S. workers.
The metal levies would be especially hard on the auto and aerospace industries, but they’d affect U.S. businesses from beer to soup to computers. The implications of a larger-scale trade war are even worse.
Contrary to the Trump administration’s beliefs, reducing our country’s trade deficit won’t necessarily increase our economic output. Thanks to the contemporary global supply chain, the impact of trade deficits on economic growth is different in every country. U.S. businesses have every reason to believe that closing our doors to the rest of the world would result in worse goods, fewer sales and less American competitiveness.
Even the prospect of global tariff skirmishes could be enough to hurt the economic expansion that’s under way.
In short, Trump’s tariff agenda is damaging for the country’s economy and its role in the world. Congress needs to stand up in defense of free trade.