US hikes tariff on Steel and Aluminum

Notwithstanding cautions from experts, his own Republican Party members and opposition Democratic Party regarding possible ignition of a regressive global trade war, President Donald Trump ordered steep new tariffs on steel and aluminum imports to the U.S. on March 08. He in his usual bullish style vowed to fight back against an “assault on our country” by foreign competitors. Despite a week of furious lobbying against his plan by Republican lawmakers and some of his own advisers, Trump said he would go ahead with penalty tariffs of 25 percent on imported steel and 10 percent on aluminum. But he also said the penalties could “go up or down depending on the country, and I’ll have a right to drop out countries or add countries. I just want fairness.” However, he exempted Canada and Mexico as “a special case” but asserted that he will negotiate for changes to the North American Free Trade Agreement with them. The new tariffs were proposed to take effect in 15 days.

                   Australia and some “other countries” might be spared for strategic reasons and fear of retaliation by trading partners. Those “other countries” can try to negotiate their way out of the tariffs, he indicated, by ensuring their trade actions do not harm America’s security. Reasoning on his tariff measures president Trump cast his action as necessary to protect industries “ravaged by aggressive foreign trade practices. It’s really an assault on our country. It’s been an assault.”

                    His move, an assertive step for his “America First” agenda, has rattled allies across the globe and raised questions at home about whether protectionism will impede U.S. economic growth. The president made his announcement the same day that officials from 11 other Pacific Rim countries signed a sweeping trade agreement that came together after he pulled the U.S. out of the Trans-Pacific Partnership last year.

                        Though he focused on workers and their companies in his announcement, Trump’s legal proclamation made a major point that weakened steel and aluminum industries represent a major threat to America’s military strength and national security. He also criticized past government’s failure in taking any step against exporters who harmed the US steel and aluminum industry by selling cheap in US domestic market.

                 There may be some immediate advantages to US industry. Century Aluminum Chief Executive Michael Bless said the tariffs would allow his company, which produces high-purity aluminum used in military aircraft, to recall about 300 workers and restart idled production lines at its smelter in eastern Kentucky by early 2019. And Trump took note of U.S. Steel’s announcement that it planned to ramp up activity at its plant in Granite City, Illinois, and recall about 500 employees because of the new tariffs.

                   But there was political criticism aplenty, especially from Trump’s own Republican Party. House Speaker Paul Ryan, appearing with Home Depot employees in Atlanta, warned of “unintended consequences.” And Sen. Ron Johnson of Wisconsin called the tariffs “a very risky action” that could put agricultural and manufacturing jobs at risk. “I’m not sure there are any winners in trade wars,” said Johnson, who once ran a plastics manufacturing business in his home state. Democratic Sen. Dick Durbin of Illinois said Trump’s action was “like dropping a bomb on a flea” and could carry “huge unintended consequences for American manufacturers who depend on imported materials.”Business leaders, too, sounded their alarm about the potential economic fallout, warning that American consumers would be hurt by higher prices. They noted that steel-consuming companies said tariffs imposed in 2002 by President George W. Bush ended up wiping out 200,000 U.S. jobs. “Tariffs are taxes, and the American taxpayer will pay the cost of a trade war,” said Cody Lusk, president and CEO of the American International Automobile Dealers Association. “Even with limited exemptions, tariffs will raise the sale prices of new vehicles.”

                      Nations around the globe that were not excluded from the tariffs reacted with dismay. The European Union warned before the announcement that it was ready to retaliate with counter-measures against iconic U.S. products such as Harley Davidson motorcycles, Levi’s jeans and bourbon. EU Trade Commissioner Cecilia Malmstrom tweeted after Trump’s announcement that “the EU should be excluded from these measures.” Malmstrom said she would be meeting with U.S. Trade Representative Robert Lighthizer in Brussels soon.  The British government said tariffs “are not the right way to address the global problem of overcapacity” and said it would work with EU partners “to consider the scope for exemptions outlined today.” Japanese Foreign Minister Taro Kono called the decision “extremely regrettable,” predicting it could have a major impact on the economy and the relationship between the U.S. and Japan, as well as the global economy. South Korea also expressed its displeasure and wanted concessions from the US. According to White House the exemptions for Canada and Mexico could be ended if talks to renegotiate NAFTA stall.

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