The Trump administration has revived a trade practice that has been largely out of favor since World War II: the tariff. Imported metals from U.S. allies Canada, Mexico, and the European Union (EU) will carry tariffs of 25 percent for steel and 10 percent for aluminum. It seems likely that the Trump administration did not fully think through the range of impact these tariffs will have. It wouldn’t be surprising if the administration’s thinking were along the lines of something as simplistic as “So don’t buy any steel or aluminum products.”
But Americans will not be able to avoid the broad impact that the tariffs on steel and aluminum will have. Since steel and aluminum imports will be more expensive, so will the products that contain components made of these metals. Appliances, automobiles, and airplanes will likely be more expensive, as will construction products such as pipes, culverts, wire, and beams. The food industry will also be impacted as cans, packaging, and cookware are likely to be more costly.
Though it’s true that American companies could choose not to use imported steel or aluminum and use only domestic-made metals, we don’t know yet whether American manufacturers can currently supply all of the aluminum and steel that we import.
Even if the American metal industry can meet all of the domestic need for steel and aluminum, costs are likely to rise. With the reduced threat of foreign price competition, American manufacturers could raise their prices.
If American companies do continue to import steel and aluminum and pay the tariffs, their costs will increase. This will result in less profitability, which could force them to raise prices on goods, eliminate jobs, reduce operations, or all of these.
The tariffs on steel and aluminum are likely to cause American stocks to suffer, as well, as Wall Street fears trade wars and the potential loss of profits. When the tariffs were announced, the Dow plunged 252 points, the S&P 500 lost 0.7%, and Nasdaq lost 0.2%.
Earlier in 2018, Trump tweeted, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win…Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore — we win big. It’s easy!”
Trump appears to think that the U.S. will win this trade war. The evidence, however, as supported by most economists, points to the likelihood that with tariffs such as those on steel and aluminum, it’s Americans who will lose.
Chamber of Commerce launching campaign against Trump tariffs | Fox Business [2018-07-02]
Steel CEOs Push for Waivers From Trump’s Tariff | Seattle Times [2018-07-02]
