Tuesday, March 6, 2018

"Free, Fair and SMART Trade"

 SWEET Meeting March 7, 2018. 4:30 to 6:00 Kayak Conference Room in Library

WHEN President Donald Trump tweeted “We want free, fair and SMART TRADE,” on March 1st, trade-watchers groaned. Later that day, after months of back-and-forth between the protectionists and the globalists in the White House, he appeared to deliver the tariffs he has long been promising. He announced tariffs of 25% on imports of steel and 10% on those of aluminum.

Mr. Trump is using the “national security argument,” also called the “national defense argument.” This argument suggests that it is necessary to protect certain industries with a tariff to assure continued domestic production in the event of a war. Do you think their is validity in the application of this argument to Trump's proposals or is it a guise to shield American steel and aluminum producers from competition.

Do you think that impacted countries will win in their suit in the Word Trade Organization? Do you think the judges will rule for or against America in these suits? If the body of judges rule in America's favor, do you think other countries will retaliate and enact their own tariffs using the national defense argument?  What type of retaliatory actions by other countries do you expect? Who are the winners from Trump's proposed tariffs? Who are the losers?

President Trump wants tariffs on steel and aluminum 

Don’t Worry About Trump’s Tariffs

Trump's steel tariffs are earning him cheers from Democrats and unions—but giving the GOP shivers 


  1. This comment has been removed by the author.

    1. While I generally would like to keep the conversation focused on the economics, I feel like I have to comment on one of the points made in the first article that seems to be more of a political bent. There was a chart presented mapping the U.S. and showing political affiliation based off the last election and the number of people involved in steel industries. There seems to be a general correlation between voting Republican last election and being involved in a steel industry. There was a fair point made that steel/aluminum protectionism was a campaign promise that President Trump made and that he might be fulfilling his promise now. I am not sure if this is the case, but I tend to believe the idea that there will be more harm than good, and, therefore, industry protectionism is probably more of a mistake than good.

      I want as many Americans to be as prosperous as possible. Some politicians/people have championed groups including American steel workers and American coal miners. They focus almost completely on these groups and lose sight of the forest for the trees. They ignore the fact that these industries have been in decline for years, and that foreign companies and new technologies provide competitive alternatives, if not wholly replacing the older technology. It becomes a situation where a lot of time, energy, and money is spent trying to keep a doomed ship from sinking. Instead of trying to save dying industries, we should try to put more money into our competitive advantages. Why spend money to save coal mining jobs when you could spend money on exciting opportunities in the sciences and technology. These industries have historically been dominated by the U.S., but countries, particularly India, China, and South Korea, are catching up fast. Being number one in something is more profitable than being number two, and certainly a lot more profitable than being number 5. The U.S., for the record, is the number four/five producer of steel depending if you include E.U. output or not.

      Second, the focus on these industries at the expense of other industries costs other industries. Slapping a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports certainly makes U.S. producers of these metals more competitive domestically. However, what of companies that rely on these metal imports to create products? How is more expensive metal going to help appliance makers, auto makers, Boeing, shipbuilders, and rail manufacturers compete in the global market? While something like 1/3 of the steel the U.S. uses is imported, we import more than 90% of the aluminum our industries use. Even the Aluminum Association admits that there is no way domestic production can meet domestic demand (http://fortune.com/2018/03/02/trump-steel-aluminum-tariff-industries/). These tariffs will increase the price of American products, reducing our competitiveness in multiple industries. These tariffs will hurt more Americans than they will help.

      Finally, these tariffs do nothing to correct the root of the problem: government interference in the market in other countries. China heavily supports their steel industry. Further, China is happy to watch as U.S. exports get torpedoed due to being overpriced due to increased material costs. They will likely profit from that by their products becoming more competitive. Other countries are likely to increase their control of their domestic markets as well. The E.U. has responded to U.S. market manipulation by taking action against U.S agricultural products primarily.

      The tariff on steel and aluminum is going to hurt the American economy, and it is, in effect, a tariff on the pocketbooks of all consumers. It will change spending habits, likely in a direction away from our domestic products. It will affect our ability to negotiate with foreign governments concerning economics and other concerns. I do not support this tariff.