The World Cries Wolf on U.S. Tariffs

President Donald Trump holds a meeting on trade with members of Congress, February 13, 2018. Reuters/Kevin Lamarque

Trump’s planned tariffs on steel and aluminum imports are a logical and long-overdue response to decades of trade cheating by friends and foes alike.

When U.S. president Donald Trump announced sweeping new tariffs of 25 percent on imported steel and 10 percent on aluminum Thursday, the world’s commentariat broke out in a frenzy of condemnation. Trump was accused of playing politics in a way that could “destabilize the global economy.” It was said that Trump’s actions could “bring global trade growth to a halt” (notwithstanding the fact that levels of global trade have already been declining since 2011). His critics screamed “trade war.” Canadian and European leaders immediately threatened retaliation. China didn’t, but American China experts predicted that Beijing soon would.

It is likely that few, if any, of these experts have read the two detailed Commerce Department reports that prompted the tariff decision, or the Defense Department memo endorsing their findings. The goal of the tariffs proposed by Commerce and endorsed by the president isn’t to punish Chinese dumping or put an end to free trade. It’s to ensure that the United States retains any domestic steel and aluminum production at all. Like President Barack Obama’s controversial auto industry bailout in 2009, these tariffs are about keeping an industry for the future, not about making it profitable today.

If China has merely expressed concern over Trump’s plans, it’s because China is not really the target of the planned tariffs. China’s massive state-owned steel and aluminum firms may ultimately lie behind the world’s glutted markets, but Chinese products account for only a fraction of U.S. imports (2.2 percent for steel and 10.6 percent for aluminum). The real problem is that other countries—including allies like Canada and the European Union—have responded to years of Chinese dumping by subsidizing their own industries and imposing broad tariffs on Chinese steel. American antidumping measures have traditionally been more narrowly focused. In a sense, Trump is only catching up with what the rest of the world is doing already.

The simple fact is that the world produces much more steel and aluminum than it needs. A global shakeout is inevitable, and every country wants to make sure that its own industries are the ones that survive. The only question is: who will blink first? If one country has done a lot of blinking over the last twenty years, it’s the United States, as the Commerce Department report amply documents. Embracing a free-market approach, being reluctant to provide subsidies, applying very selective tariffs and never even thinking about nationalizing its strategic industries, the United States has consistently ceded market share to its statist rivals overseas. The Trump tariffs bluntly but effectively draw a line under twenty years of creeping retreat.

In its evaluation of the Commerce Department reports, the Defense Department flatly concluded that “the systematic use of unfair trade practices to intentionally erode our innovation and manufacturing industrial base poses a risk to our national security” and agreed with the Commerce Department’s conclusion “that imports of foreign steel and aluminum based on unfair trading practices impair the national security.” Of the three national-security responses offered by Commerce, DoD preferred the second option, targeted tariffs, over the first (global tariffs) and third (global quotas). But that’s a question of strategy, not principle.