Global trade: The madness of Trump’s tariffs

By announcing tariffs of 25 per cent on steel imports and 10 per cent on aluminium, the president will know that retaliation from other countries is inevitable

An employee cuts into an aluminium roll at the Constellium factory in the eastern French city of Biesheim. Major steel and aluminium producing states condemned US president Donald Trump’s plan to impose tariffs on the industry. Photograph: Patrick Hertzog/AFP/Getty Images

An employee cuts into an aluminium roll at the Constellium factory in the eastern French city of Biesheim. Major steel and aluminium producing states condemned US president Donald Trump’s plan to impose tariffs on the industry. Photograph: Patrick Hertzog/AFP/Getty Images

 

The announcement by President Donald Trump of tariffs on imports of steel and aluminium into the US is a worrying development. In what amounts to a protectionist move aimed to please his core base, Trump’s action will hit other areas of the US economy and also risks sparking an escalation of international trade tensions. He should think again before the formal announcement of the tariffs is made next week, though a succession of bellicose tweets suggests that this is most unlikely.

When President Trump took office, there were fears that if he followed through on promises relating to trade made during the election campaign it could damage the world economy. On the election trail, Trump had pledgedto scrap or renegotiate a series of trade agreements, take strong action against countries such as China, which he claimed were competing unfairly, and pull the US out of the international structures overseen by the World Trade Organisation.

After he took office little enough happened on the trade front for some time, beyond more of the same rhetoric. However, any hope that this aggressive agenda had been put on the back burner has now been dashed. By announcing tariffs of 25 per cent on steel imports and 10 per cent on aluminium, the president will know that retaliation from other countries is inevitable. Rather than worrying about this, his tweets have suggested he would welcome a trade war, which he believes the US could win.

This is economic madness. Many more jobs in the US rely on the use of steel than do on its production. Companies making cars, aircraft, domestic appliances and so on will face higher costs and in some cases this will increase prices to consumers. All the available economic evidence is that this will hurt the US economy, not help it.

And then there are the wider risks. Already a number of countries which export steel to the US have threatened to retaliate and President Trump upped the ante over the weekend by saying he would respond with further measures.

The EU has said it will have to act to ensure that steel, otherwise destined for the US, does not flood its markets. And beyond that it is likely to impose its own tariffs on US imports in response. The danger then, in the words of EU trade commissioner Cecilia Malmstrom, is of a “dangerous domino effect” as countries start making tit-for-tat responses.

It is clear over recent years that the move to gradually liberalise world trade, under way since the 1950s, has stalled, partly due to questions about the spread of the gains. Now, however, we are entering dangerous territory where the risk is of actually going backwards, towards some kind of new protectionism. For a small country like Ireland, heavily reliant on world trade, this carries obvious dangers.

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