President Trump's Potential Tariffs on Foreign Steel

February 21, 2018

President Trump’s Potential Tariffs on Steel

This week President Trump has had several propositions set out in front of him that would place tariffs on foreign steel and aluminum. Reportedly there are several options, ranging from a worldwide tariff, to tariffs targeting certain countries, specifically China. The tariff proposal supposedly drafted for national security reasons is largely meant to eliminate Chinese steel from entering the U.S. market, directly and indirectly. Chinese steel has developed a reputation for being “cheap” and poorly manufactured. The economic rationale behind the tariff is also meant to increase the American steel industry and bring jobs to the industry. Walking through some options, specifically for steel (the aluminum tariffs are quite similar), and seeing which one, if any, is a clear choice in order to protect the interests of the American economy, both short-term and long-term.

            One option, to set a universal 24% tariff on steel that is applicable to all countries, seemingly is the most fair in a moral sense, if there were to be any tariff at all. This is meant to protect the U.S. from importing unfinished Chinese steel products that are polished up and finished in other countries, being branded as say North Korean or Vietnamese steel, rather than the Chinese steel that they actually are. This option could prove most damaging to the U.S. economy, as countries like Canada and Mexico could retaliate against the U.S., imposing steep tariffs of their own on U.S. products such as agricultural goods. Another option, tariffs of at least 53% on steel imports in 2018 that exceeded the amount of imports from 2017 from Brazil, China, South Korea, Vietnam, and Russia, among others, also poses the threat for foreign retaliation. And the third option, limiting the amount of imported steel the U.S. receives also has negative connotations for the global steel market, more than likely hurting the global economy and increasing the price of steel within the U.S.

            The most troubling part about these new, potential tariffs is that President Trump has proposed them on the basis of national security, which has raised more questions than answers. Phil Levy, trade expert at the Chicago Council on Global Affairs, warns, “You now open up the door for anybody to do anything as long as they say ‘national security.’ That could open the door for a global trade war” (CNN, 2018). Levy brings up a daunting, yet valid point that holds true, especially in an American society where national security has become a top priority in the years since 9/11. Trump has been able to cite the national security argument by invoking a “little-used 1962 trade law” that has not been used since 2001 (Reuters, 2018). Trump has been cautioned by U.S. lawmakers, steel, and aluminum users that restrictions may cause price spikes on raw materials, leading to American consumers just importing the finished product and leading to significant job loss in the United States. The reasons behind the tariff are just as troubling as the potential consequences that could ensue.

            Trump must tread lightly here, as international trade and economics is supposed to be his forte. The most viable option, it appears, is a combination of the limits on imported steel and the 53% tariff on excess imported steel from the 12 countries (Brazil, China, Costa Rica, Egypt, India Malaysia, South Korea, Russia, South Africa, Thailand, Turkey, and Vietnam). This would definitely offend those particular countries, but if their steel exports were able to remain the same from 2017, then the damage would be minimal while also looking like a foreign policy win for Trump. In addition, the quota on U.S. steel imports would serve as a catalyst for the American steel market, while also allowing the market to remain competitive on a global level, keeping the price of steel in the U.S. market reasonable. As opposed to the blanket-tariff that would certainly offend many countries, leading to retaliation on the U.S. export market, while also leading the U.S. to a more isolationist market, moving away from the global economy. With the global tariff policy also comes the mention of a threatened national security; is the U.S. threatened by every other country? What does that say about the integrity of the Commander in Chief of the world’s most powerful military? President Trump has until April 11 to make a decision on the steel tariffs and April 20 to make a decision on the aluminum tariffs, which are very similar in nature.

Lawder, David, and Lesly Wroughton. 2018. U.S. Commerce Department proposes hefty import curb on steel, aluminum. In Reuters. https://www.reuters.com/article/us-usa-trade-steel/u-s-commerce-department-proposes-hefty-import-curbs-on-steel-aluminum-idUSKCN1G01QB

Julia Horowitz. Trump Tariffs on Steel would hit China- and the entire global trading system. In CNN Money. http://money.cnn.com/2018/02/18/news/economy/us-imports-steel-tariff-effect/index.html