Trump's Steel Destruction - WSJ Editorial
So much for Donald Trump as genius deal-maker. We are supposed to believe his tariff threats are a clever negotiation strategy, but on Thursday he revealed he’s merely an old-fashioned protectionist. His decision to slap tariffs on steel and aluminum imports from Europe, Canada and Mexico will hurt the U.S. economy, his own foreign policy and perhaps Republicans in November.
In March Commerce Secretary Wilbur Ross dangled temporary exemptions to 25% steel and 10% aluminum tariffs to extort trade concessions from U.S. allies. Mr. Ross withdrew the exemptions on Thursday, saying the U.S. “was unable to reach satisfactory arrangements” with Canada, Mexico and the European Union. He means they didn’t unilaterally surrender.
Mr. Ross announced the tariffs under Section 232 of the 1962 Trade Expansion Act ostensibly to circumvent the World Trade Organization. WTO rules let countries adopt tariffs to protect national security, but Canada, Mexico and Europe are hardly a threat.
Canadian steel and aluminum are actually integral to U.S. national defense, as Commerce’s Section 232 reports acknowledge. Mr. Trump complained that Lockheed ’s F-35s cost too much, but now he’s going to make U.S. fighter jets and other weapons more expensive, which could give Russia an advantage in international arms sales. Brilliant. Another irony is that Mr. Trump has denounced China for using national security as a pretext to promote domestic industries like semiconductors. He’s essentially doing the same.
American businesses rely on complex cross-border supply chains that take time and money to change. Most will have to internalize the tariff costs, which will mean raising prices or hiring fewer workers and paying lower wages. The tariffs also create uncertainty as businesses petition Commerce for product exemptions while delaying investment.
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Mr. Ross has dismissed the impact on consumers, but a 25% increase in input costs is nothing to sniff at. Companies use imported steel and aluminum in everything from cars to beer cans to Hershey’s kisses wrappers. The Federal Reserve in April reported that a maker of tractor trailers said that it “can’t raise prices as fast as material costs.” A toy manufacturer in the Northeast that uses a thin-gauge aluminum foil said the tariffs had raised its prices three-fold.
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All of which means that Trump’s gambit could backfire politically. Mexico is America’s biggest apple export market. Washington Rep. Dave Reichert says apple and pear exports to Mexico increased by 70% after Nafta. Wisconsin produces more than half of the nation’s cranberries whose biggest export markets are the Netherlands and Canada.
Democrats have bought billboards in California’s Central Valley denouncing the impact of Mr. Trump’s trade policies on farmers. Even steel manufacturers will take a hit since Canada buys about half of U.S. steel exports while Mexico imports about 40%. The steelworkers union supported an exemption for Canada.
He aspires to be Ronald Reagan but his tariff folly echoes of Herbert Hoover.
https://www.wsj.com/articles/trumps-steel-destruction-1527809177 (paid subscription)
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