Trade, Tariffs, Trump

June 8, 2018

By John J. Metzler

UNITED NATIONS—In the midst of an expanding American economy, record low unemployment rates, and buoyant consumer confidence, the Trump Administration has inadvertently planted the seeds of a global commercial slowdown and political showdown.  The steel and aluminum tariffs slapped on imports from our key Transatlantic trading partners, not to mention neighbors Canada and Mexico, have created a looming danger.

Free Trade must be Fair Trade as the President always stresses.  He’s right.  America has indeed been taken advantage of by an uneven playing field and fast and loose rules.  Trade deficits, as this writer has always stated, pose not just an economic danger but a national security risk as well.  I’m totally on board here.

Tariffs offer a feel good solution to a far deeper commercial malaise. The tariff taxes pose  another unseen tax on consumers which will raise prices in the name of protection for our domestic industries and workers.

Though the original intent of the tariffs were aimed at the People’s Republic of China, as it turns out, the brunt of the trade showdown will affect America’s key political allies in Western Europe and North America.  And this is OK?

The European Union’s Jean-Claude Junker characterized the tariffs as “protectionism, pure and simple.”  Given that the Europeans wrote the book on protectionism centuries ago, I take this comment with a wry smile.  But not to digress.

When the whole showdown started in March, the feeling was that our closest trading partners in Europe and Canada would gain a reprise.  There appeared there would be a “cut out deal” for NAFTA partners Canada and Mexico.  But the policy pendulum swung back with the recent announcements that Canada, Mexico and the Europeans would indeed be slapped with tariffs.

Happily Argentina, Brazil, and South Korea have been spared from the steel sanctions.

Canada whose steel and aluminum exports to the USA last year reached $12.8 billion will soon slap tariffs on a corresponding sum of American trade.  Canadian Foreign Minister Chrystia Freeland lamented, “This is the strongest trade action Canada has taken in the post-war era…this is a very strong Canadian action in response to a very bad U.S. decision.”

France’s Finance Minister Bruno Le Maire was less gentle, “Global trade is not a gunfight at the OK Coral.”

Washington’s tough approach to its closest friends and trade partners comes at a curious time.  The brinksmanship may be a tactic in turbulent  U.S. trade negotiations with Beijing. President Trump has rightly focused on the totally imbalanced and unfair China trade but has veered into side disputes with just about everybody else.  Is such posturing with Europe part of a grand strategy dealing with the bigger issue of the U.S./China trade deficit of $375 billion in 2017?

Put in less arithmetical terms, China sells the USA four times as much as Americans buy from the People’s Republic.

American trade teams negotiating in Beijing played commercial hardball regarding the deficit;  Commerce Secretary Wilber Ross visited to present planned tariffs on $50 billion in Chinese exports unless China would buy more American products.  Beijing’s state-run media blustered back, “Let them prepare for an epic trade war.”

Uncertainty and unease will pervade markets for American exporters too as we tip toe round the tariff issue hoping to avoid the minefield of a trade war.  American consumers and companies would naturally be affected and not in particularly positive ways.  For consumers the lack of choice would likely lead to higher prices.  No question that there’s a price to pay to protect American jobs, many people are willing to share the burden to do so, but I’m not so certain these people actually realize the depth of the dilemma and the hollowing out of our industrial base.

For business the challenge is compounded.  What will the tariffs be?  Will Washington switch policy in six months?  Shall American agricultural produce exports be blocked from the China  market?

The sanctions have faced stiff criticism from many U.S. exporters and Republican lawmakers.

Facing a “trade war” the United States will make a stand at the upcoming G-7 Summit in Canada.  Here amidst the splendid St. Lawrence River in the Quebec’s Charlevoix region, the leaders of Canada, Japan and the European power economies France, Germany, Italy and the United Kingdom shall come together with the U. S. at a particularly awkward time.

We are not just talking about trade and markets here, but political relationships and shared partnerships, and enduring friendships with each of the Summit participants.  Let’s not endanger that.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism The Diplomacy of Separated Nations: Germany, Korea, China.

{ 2 comments… read them below or add one }

T. Palmer June 9, 2018 at 12:48 am

Agreed! We will need our staunchest of allies to stand with us not against us.

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Stephen Kiely June 9, 2018 at 11:35 am

A trade war would hurt those who benefit from the current trade policies the most. Prices in the US would go up, possibly, but I believe that America already consumes most of what it produces (80%??) We consume more of our domestic products than what we export.

The current global trade agreements that the US entered into in the last 40 years has gutted the American manufacturing sector of our economy. The big “sucking action” from NAFTA that was predicted by Ross Perot in the 1990’s has happened. Its time to rebuild the American manufacturing sector of our economy including steel and Aluminum production. A healthy economy can not be based on the service sector only. American’s may have to pay more for Steel and Aluminum but more industry in America will create a bigger impact on the economy overall….. trucking, shipping, storage, equipment to move and store manufactured goods, desk jobs, accounting jobs, communication jobs, infrastructure jobs, etc. etc. etc. will be required once manufacturing comes back to America instead of buying cheap steel and aluminum (and other products) from China and other countries around the world. Wages will have to go up since the unemployment numbers will dip even lower. America will have to import labor to keep up with the labor market demands.

The greatest economic expansion in the history of the United States was just after the Civil War when very high tariffs were imposed on imported goods. Donald Trump is doing the right thing. The globalist don’t like it but then again, when have the globalist ever cared about American?

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