The Tariff Trump Card
Is a shot at China and Russia worth the high domestic economic price? The president seems to think so.
President Donald Trump announced “yuge” tariffs on steel (25%) and aluminum (10%) Thursday, despite reportedly stiff opposition from his advisers and Republicans. “We’re going to be instituting tariffs next week,” Trump said. “People have no idea how badly our country has been treated by other countries.” Such assertions have been part of his rhetorical appeal since long before he announced his presidential bid, and in office he’s carried through with recent tariffs on solar panels and washing machines. His “America First” philosophy has indeed had some positive effects, but there’s not a whole lot to like with these tariffs.
Yes, there’s a defensible geopolitical calculation — countering China. Red China’s nuclear puppet, North Korea, has acted on a very long leash of late. The best way to pressure Pyongyang is to pressure Beijing — which had a top economic official in Washington to discuss trade issues at the time of Trump’s tariff announcement. China is 11th on the list of foreign sources of steel in the U.S. Fifth on that list is Russia. Trump is taking a shot across the bow of both of these geopolitical foes.
Unfortunately, it’s also a shot in the foot. Other nations from whom we import steel are hardly foes. Canada, Germany and Japan, among others, will all take a hit, and undercutting those alliances to spite China and Russia is a strange cost-benefit calculation. The European Union is threatening retaliation. That said, Trump often uses policies and rhetoric as negotiating ploys. Much as he’s verbally assaulted NAFTA, Trump may be merely setting a bargaining position, to be undone when he feels America’s position is stronger. But he also insists these harmful tariffs will remain in place for “a long time.”
Which brings us to the fact that tariffs are a high price to pay domestically. “The President is proposing a massive tax increase on American families,” said Sen. Ben Sasse (R-NE). “You’d expect a policy this bad from a leftist administration, not a supposedly Republican one.”
Investor’s Business Daily sums up the economic impact: “Protectionism … will lead to higher prices for all, the loss of thousands of jobs and a political-crony windfall for a handful of big companies.” Swamp, meet Trump. George W. Bush’s steel tariffs of 2002 and 2003 cost 200,000 jobs and $4 billion in wages. Trump’s tariffs aren’t going to be any better just because he talks a good populist line.
Aside from lost jobs and wages, many things (from beer to cars) will become more expensive for all Americans. And our Todd Johnson just noted Tuesday the detrimental effect this will have on American oil production — and thus gas prices. We suppose everyone can pay for these price increases with their new tax cuts. Not a great tradeoff.