What Will Trump's Tariffs Mean for America's Economy?

Trump holds a meeting on steel and aluminum tariffs at the White House in Washington

It's not clear that President Trump understands the consequences of acting on trade disputes unilaterally.

In what the editorial board of the Wall Street Journal called it “the biggest policy blunder of his Presidency” as President Donald Trump announced that he would impose a 25 percent tariff on imported steel and 10 percent on aluminum. The White House declaration, with China as one of the main targets, underscores the Trump administration’s misguided belief that “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!”

President Trump’s “revengeful” trade policy pronouncements have become not only myopic but have also undermined the national security and economic interests of the United States and its ability to navigate global diplomacy with its friends and allies. Despite the tensions between the two nations in both economic and geopolitical realms, however, Washington and Beijing have generally recognized the mutual benefits of trade. This form of “controlled tension” has in the past been able to navigate the contours of various bilateral disputes and keep good relations with other countries.

All that changed in 2016 when then presidential candidate Trump declared that America could “no longer allow China to rape our country” and that it was the “greatest theft in the history of the world.” Becoming President Trump in January 2017, he kept his campaign pledge and, on his first day in office, withdrew American participation in the Trans-Pacific Partnership, a trade deal that created a free-trade zone with eleven other nations that constituted approximately 40 percent of the world’s economy.

Eye on Antidumping

This turned out to be only an opening salvo to a busy 2017 where China was either the direct or indirect target of trade actions. In April, the U.S. Department of Commerce self-initiated an inquiry under Section 232 of the 1962 Trade Expansion Act to determine if foreign steel imports compromise national security. In November, the Department of Commerce self-initiated investigations on antidumping and countervailing duties of common alloy aluminum sheet from China. According to the Washington Post, 2017 made “the busiest year for tariff cases since 2001, among other disputes over Spanish olives, Vietnamese tool chests, and Canadian jetliners.”

Not to lose the momentum of 2017, the Trump White House began 2018 by approving broad tariffs on imported solar cells and washing machines because they are believed to be the “cause of serious injury to domestic manufacturers.”

Having completed the Section 232 investigation on January 11, Secretary of Commerce Wilbur Ross released the results on February 16, forming the basis for President Trump’s unilateral tariff announcement. Ross kept still supporting the president while ignoring the empirical evidence associated with “unintended consequences.” The White House’s “trade war” continues in the midst of rumors that the president’s top economic advisor Gary Cohn will soon the leave the administration as he “lost the battle to prevent the imposition of steep tariffs pushed by protectionist advisers.”

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