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June 2, 2018

Trump Raises Specter of Tariffs Against Allies

Predictably, those allies respond in kind as potential trade war battle lines are drawn.

President Donald Trump’s Secretary of Commerce Wilbur Ross announced Thursday that the U.S. would raise tariffs on steel and aluminum against some of the nation’s closest allies. The rationale behind the decision is national security. Ross explained, “We take the view that without a strong economy, you can’t have strong national security.” But national security wasn’t the only reason cited. Trump sees that NAFTA, which he has long been critical of, as well as current trade deals with Europe have tended to lean unevenly in favor of trade partners rather than the U.S. In other words, Americans are been taken advantage of, in Trump’s estimation.

Trump seemingly laid down the gauntlet Thursday, stating, “The United States has been taken advantage of for many decades on trade. Those days are over. Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United States will agree to a fair deal, or there will be no deal at all.” This was in response to Trudeau’s refusal to sign a new deal on NAFTA because he took umbrage with its inclusion of a sunset clause. After Trump’s tariff announcement, Canada threatened to raise retaliatory tariffs on U.S. imports.

European Union leaders too have begun trotting out their planned counter tariffs. And as the trade war battle lines are quickly being established, many lawmakers have issued their opposition to the administration’s tariff plans. House Speaker Paul Ryan (R-WI) mused that the U.S. shouldn’t be “targeting America’s allies when we should be working with them to address the unfair practices of China.”

We’ve argued numerous times that tariffs will harm the U.S. economy and the very American consumers the president aims to protect. But there is no question Trump is engaged in a strategic game of chicken here. Who will swerve first? We’ll find out soon. Thus far, he has been able to cut new trade deals with South Korea, Brazil, Australia and Argentina. His tariffs are a high-stakes gamble to achieve the same result with Canada, Mexico and Europe. Time will tell if it works.

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