After months of uncertainty and vague hints, Donald Trump has announced that he is prepared to sign off on trade tariffs regarding US imports of imported steel and aluminum, declaring that he was taking action against what he called ‘unfair trade’ and sending Republicans, Wall Street, and industries scrambling.
During his presidential campaign, and occasionally in his time in office, Trump has often railed against what he considers to be unfair trade deals with other countries, promising to change the balance of trade. For example, the US imports four times more steel than it exports, relying on nearly 100 nations to bring in steel. Trump also promised to renegotiate the NAFTA agreement between the US, Canada, and Mexico which he claimed has cost America vital jobs and wastes money.
If implemented, Trump’s plan will see a 25% tariff on steel products with a 10% tariff on aluminum in a move that some experts fear may lead to a trade war with Canada and China who will be hit hard by the upcoming tariffs. China has already threatened to block all imports of American soybeans while the European Union has also put out a statement saying that they will consider retaliatory measures if Trump goes through with his plan.
Steel industry representatives were quick to praise and support Donald Trump’s move, especially after their stocks showed a modest increase. Elsewhere, Wall Street saw the Dow Jones dip again before reclaiming some of its losses later in the afternoon. The DOW Jones, one of Trump’s favorite markers of his successful economy, dipped by 500 points as many companies such as Boeing raised concerns that the tariffs will affect their businesses by forcing them to raise consumer prices.
There is also uncertainty surrounding whether these tariffs would be phased in gradually or whether they would take immediate effect. Trump admitted that the policy was still being written out, but he expected to sign it next week. In a hastily arranged meeting, Trump encouraged steel companies to regrow their industries and look upon this as an opportunity to help him achieve the economic ideas of his ‘America First’ stance.
Trump’s decision faces considerable backlash within his own party who are already reeling from his about-turn regarding gun control and who are scrambling to respond to this sudden announcement. The party is split between hardliners who agree with Trump’s rhetoric and those who are more cautious in their approach to foreign trade. Many had previously expected Trump to tackle the trade deficits eventually but in a measured and gradual manner rather than the sweeping and hurried changes that Trump has proposed.
Even his own aides have been caught off guard by this new proposal in a week that has seen Trump struggling to tackle legislation regarding gun control, another divisive issue that has split both Republicans and Democrats. According to some reports, aides were left hurrying to get a draft together and contacting representatives to inform them of the announcement.
On a wider scale, Trump’s actions are being considered as one of the most worrying moves towards Trump’s ‘America First’ rhetoric to date. Despite claiming that he merely wants trade agreements to be fairer towards the USA, many interpret Trump’s actions as a move towards protectionist policies and away from the idea of free trade. Those who may lose out on new tariffs will doubtlessly retaliate, leading to a trade war in which everyone loses. The fear of a trade war and threats from trading giants like China are the reason why George W Bush lifted the steel tariffs he introduced back in 2002.
The biggest losers will not only involve companies who need steel imports but also consumers as shortages and increased prices, become the norm. Steel industries may cheer, but the response from companies who depend on the imports indicate that there might be more losers than winners. International relations will become more strained as allies and rivals alike suffer from the economic upheavals brought about by Donald Trump.
Nothing is certain, of course. There is intense lobbying even now, with economic advisors and lawmakers urging Trump reconsider or to water down his plans. Trump will probably not listen, too concerned about fulfilling his campaign promises. After his u-turn on guns, he needs to throw a bone to his base, to show he’s still a man they can trust. What better way than to harass foreigners about stealing America’s money?
Trump once said that America would be tired of winning. If sparking off an international game of chicken is winning, heavens help us if America ever starts to lose!