As promised during his 2016 presidential campaign, President Donald Trump has proposed new tariffs on steel and aluminum imports. Trump’s new plan places tariffs of 25 percent on imported steel and 10 percent on aluminum. According to The White House, the main objective of these large tariffs is to “revive” America’s steel and aluminum industry, and protect American manufacturers from foreign steel and aluminum. While this may be true, the disadvantages of such tariffs drastically outweigh the advantages. Following the announcement of these tariffs, Gary Cohn, the top financial advisor for Trump, stepped down. Cohn was a major opponent of the tariffs due to the excessive amount of backlash such tariffs would bring. Though these tariffs are ill-advised by both Democrats and Republicans, Trump remains determined to sign off on these tariffs.
Steel and aluminum are crucial materials for many products on the market. From beer cans to the building structures, steel and aluminum are used for infrastructure and many consumer products. However, the steel industry in America is not under siege by foreign steel manufacturers. America’s steel and iron industry is the third largest in the world, following China and Japan. The aluminum industry is also the sixth largest in the world, so the US’s metal manufacturers are not under severe threat. China produces the most crude steel in the world by a very large margin, but their manufacturers receive large subsidies from the Chinese government. A proper capitalist economy does not rely on government subsidies to generate economic growth and output.
In retaliation to these new proposed tariffs, the EU plans to place tariffs of their own on US imports. The tariffs will be placed on shirts, juice, steel, and other American goods. A trade war does not yield many winners. Head of the International Monetary Fund, Christine Lagarde stated, “nobody wins, one generally finds losers on both sides.” The US places tariffs on foreign imports to protect the domestic economy, but other countries will do the same with tariffs on US products. Prices will increase on many goods because of the dependence on steel and aluminum. The trade war will further widen the gap between the United States and the rest of the world, and the prices of many goods will increase as a result. Economists estimate that many of the financial gains made during the Trump presidency so far could be erased due to this trade war. The stock market has already gone down after Trump’s tariff proposal and the DOW industrial average will only decrease more if these tariffs are established. Worst of all, many Americans’ jobs will be at risk because of these tariffs.
The policy of “America First” is important for maintaining the domestic economy and bolstering up local businesses. However, these tariffs only protect a small fraction of US jobs while jeopardizing millions of others. Companies like US Steel and Century Aluminum have claimed that the new tariffs would result in about 800 new jobs. This good news for blue collar workers in the steel and aluminum industry, but in reality the tariffs could lead to a loss in jobs. According to Bernard Baumohl, chief economist at the Economic Outlook Group, the US could lose 25,000 jobs. Another estimate from Moody’s Analytics estimates a loss of 100,000-150,000 jobs. Even aluminum companies have acknowledged the job loss in the manufacturing sector due to the tariffs. The reason for these losses is because of the dependence on steel and aluminum. Cars, canned goods, airplanes, and medical equipment makers rely heavily on steel and aluminum for their products as well as its manufacturing. The potential increase of prices will increase companies’ cost for manufacturing and this would result in a layoff of employees.
Anheuser-Busch, Boeing, and Ford have already lost value in their shares after the tariff proposal. The soaring prices of steel and aluminum spell economic doom for multiple countries, especially the US. Competition may lead to some benefits, but this trade war will not leave winners on either side. 107 House Republicans wrote a letter to the president about their concerns over the tariffs. The EU and other countries including Canada have warned the president of these costly, yet he remains insistent on passing these tariffs. Trump’s America First policy has already weakened relations with other world powers and this only worsens the matter. The backlash will be tremendous both internationally and domestic. Ego and pride should not get in the way of economic success.
