Trump Steel Tariff Plan Roils Allies and the Dow Jones. Will It Go Through?
- The Knowledge Group
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President Trump announced hefty tariffs are coming on metal imports. Steel products in particular will face a whopping 25% tariff.
Why is this coming now?
As a presidential candidate speaking to desperate people in formerly bustling steel towns, Trump’s message resonated: other nations are “dumping vast amounts of steel all over” the country, to the detriment of U.S. steel firms and jobs in the industry. Trump promised a presidency that would restore U.S. steel to its former greatness, and end the “disgraceful” treatment the industry had to bear because of China.
Yet China is far from the lone source of steel and other metals. More than a hundred countries import steel to the United States, and a number of them are key allies. Canada, South Korea, and Japan are three examples of U.S. allies in the top ten list of our steel sources. Of the total steel imports to the United States, Canada is the biggest source, at 16 percent.
EU countries also ship steel to the United States. Jean-Claude Juncker, the Luxembourg national who presides over the European Commission, vowed to retaliate. Expect strikes against Levi’s, Harley-Davidson, and Kentucky bourbon, Juncker says.
Canada’s leaders said tariffs imposed on Canada would be “absolutely unacceptable”; and China’s are expressing “grave concern.”
So is the U.S. stock market. An impending trade war makes risk-averse investors leery. David Kotok, chair of Cumberland Advisors and its chief investment officer, reportedly said: “For now, the more predictable forces of tax policy, fiscal policy, and monetary policy are overshadowed by the incendiary news flow and protectionist rhetoric.”
The United States has imposed steel tariffs before. This occurred in 2002. President G. W. Bush ended them about 20 months later to avert the growing harms of a trade war. Steel-intensive industries estimated that Bush’s tariffs cost more than 200,000 U.S. jobs.
A loss such as that, should economic history repeat itself, would take years to remedy. But it is not too late for President Trump to reverse course before this war begins.
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