Why trade is good, tariffs are bad, and the consequences of getting it wrong
Recently, President Trump announced that his administration would raise tariffs on imported steel and aluminium. By pretty much all accounts this was an impulsive decision brought on by a series of totally unrelated events which did not go the President’s way and upset him. While that’s very concerning, this article is about the actual tariffs the President indicated he would put into place.
Can he do that?
Yes. Well, sort of. The President has pretty wide ranging powers when it comes to declaring tariffs but the more narrowly tailored those tariffs are, the sketchier the legal justification for them. The easiest sort of tariff Trump can push though is one which targets a specific industry — like steel.
If Trump wanted to put in tariffs against a particular country he’d have some more legal hoops to jump through though that’s not a terribly high bar to clear. If he could sell the idea that the United States is at war or that there was some other national crisis afoot he would have more targeted options open to him. As it is, however, industry wide tariffs fall well within the powers Congress has granted the President.
Is that a good idea?
Not really. Or at least, not for most people. If you happen to work in a steel mill it’s a fantastic idea. American steel production has grown slowly while steel demand has jumped and the result is that the United States has become one of the world’s largest steel importers.
Tariffs will make that imported steel more expensive and allow domestic mills to charge more for the steel they produce: great if you’re a steel worker, less great if you buy products made from steel.
Or products made by products made from steel. A jump in steel prices will make goods from cars to pipe fittings more expensive and, along the way, drive up prices for everything from tractors to soup.
What happens then?
After that, we’re off to the races. If tariffs save American jobs they cost jobs in other countries and those other countries are going to be annoyed by that. Steel tariffs will hit America’s top steel providers the hardest. That’s Canada (16%), Brazil (13%) and South Korea (10%) — not exactly the trade adversaries Trump promised to get even with back in 2016.
Some of those countries will shrug and get back to producing steel but some won’t. A tariff constitutes a barrier to trade and, as a member of the World Trade Organization, the United States has promised not to use tariffs like that to protect mature, well established industries like steel and aluminum. Under WTO rules, every steel producer from Australia to Vietnam can ask the WTO to punish the United States for these tariffs.
This “dispute settlement” process isn’t a “trade war” as President Trump thinks of it — one nation vs another — but more like the United States vs the World. Running afoul of the WTO could lead to widespread sanctions, tariffs, and a host of other thorny punishments designed to hit Americans in their wallets.
Tell Congress What You Think
The President has a lot of power to act without Congress on trade but that doesn’t mean that the Senate or House has to be quiet about it. You can tell Congress what you think about this or any other topic by texting RESIST to 50409. Or, if SMS isn’t your style, you can contact your government by talking to Resistbot on Facebook Messenger, Telegram, or Twitter.
Target your message
If you live in one of the following states, your Senator is on the Finance Committee’s subcommittee on International Trade, Customs, and Global Competitiveness and they need to know how you feel about this issue. If you live elsewhere you can still put your Senators and Representatives on blast but they’re likely to have less informed opinions on the subject.
- Texas — John Cornyn (R) Chairman
- Pennsylvania — Robert Casey Jr (D) Ranking Member
- Iowa — Chuck Grassley (R)
- Kansas — Pat Roberts (R)
- Georgia — Johnny Isakson (R)
- South Dakota — John Thune (R)
- Nevada — Dean Heller (R)
- Michigan — Debbie Stabenow (D)
- Florida — Bill Nelson (D)
- Missouri — Claire McCaskill (D)
- Maryland — Benjamin Cardin (D)