Just ripples on a pond...
https://www.cnbc.com/2018/03/03/trump-t ... ts-up.html
https://www.cnbc.com/2018/03/03/kudlow- ... hikes.html
President Donald Trump threatened to hit car exports from the European Union with a retaliatory tax, escalating a brewing global fight with U.S. trading partners triggered by newly announced 25 percent U.S. tariffs on imported steel and aluminum.
In a post on Twitter, Trump cited a "big imbalance" between the two countries, said if the 28-nation bloc insisted on imposing punitive taxes on U.S. goods, America would strike back on European car exports. It was an apparent response to European officials threatening policy changes of their own in the wake of Trump's sudden pronouncement on metal imports.
"If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a tax on their cars which freely pour into the U.S.," the president said on Twitter.
That could spell trouble for car manufacturers like Volkswagen and BMW, two of the most popular European brands sold in the U.S. The German luxury car maker also manufactures many of its cars in America, shipping billions of dollars worth abroad.
In 2016, the EU shipped more than 6 million cars abroad, and the U.S. — its largest market by far — absorbed more than 1 million of those, according to the European Automobile Manufacturers Association.
Each year, the U.S. imports more from Europe than the continent absorbs in American goods, to the tune of a trade deficit worth more than $11 billion in 2017, according to U.S. Census data.
Trump's hasty decision to impose tariffs on steel imports has stoked talk of a brewing trade war, roiling both the political establishment and the global economic order. The move also prompted E.U. trade chiefs to weigh hitting a broad array of U.S. imports with a 25 percent tax, Reuters reported this week.
One of the ironies of trade protectionism is that tariffs and import quotas are what we do to ourselves in times of peace what foreign nations do to us with blockades to keep imports from entering our country in times of war.
Or consider that we impose sanctions on U.S. enemies such as North Korea, Russia and Iran because we want them to feel the economic pain of being deprived of imports. But now we are imposing sanctions on our own country by punishing with tariffs in order to make Americans more prosperous. If ever there were a crisis of logic, this is it.
President Trump genuinely believes that his steel and aluminum tariffs will save thousands of blue collar jobs. And we know from our interactions with him that he truly cares about these workers in Pennsylvania, Ohio and other rust belt states.
The American people do as well, and we don't want factories to shut down. But even if tariffs save every one of the 140,000 or so steel jobs in America, it puts at risk 5 million manufacturing and related jobs in industries that use steel. These producers now have to compete in hyper-competitive international markets using steel that is 20 percent above the world price and aluminum that is 7 to 10 percent above the price paid by our foreign rivals.
In other words, steel and aluminum may win in the short term, but steel and aluminum users and consumers will lose. In fact, tariff hikes are really tax hikes.
Some of those 5 million jobs will be put in harm's way. And if they sell less to foreigners, the trade deficit goes up, not down.
Since so many of the things Americans consumers buy today are made of steel or aluminum, a 25 percent tariff will likely get passed on to consumers at the cash register. This is a regressive tax on low-income families.
Trump should also examine the historical record on tariffs, because they have almost never worked as intended and almost always deliver an unhappy ending.
The Smoot-Hawley Tariff Act of 1930 signed into law by Republican President Herbert Hoover gave us, and worsened, the Great Depression.
Richard Nixon's 10 percent import surcharge contributed to the stagflation of the 1970s.
George W. Bush tried to save the steel industry by imposing tariffs on steel and If those tariffs worked, we wouldn't be having this discussion today. We tried to save the color TV industry with protectionist measures and instead they wiped out the domestic production.
We aren't persuaded by the Trump administration claim that we need to impose these tariffs for national security reasons. Despite stiff competition from imports, many specialty steel producers are doing just fine and actually exporting steel to Mexico and Canada.
Meanwhile, Canada is the number one exporter of steel to the United States. Does anyone really believe Canada is a national security threat to the U.S.?
What does worry us that Canada and Mexico are now both threatening retaliatory tariffs against America. This tit-for-tat trade breakdown could put NAFTA in serious jeopardy. That could inflict severe economic damage to all three nations, and a stock market meltdown.
Trump should continue to make American producers more competitive in global markets through tax, regulatory, energy, and other pro-America policy changes that bring jobs and capital back to the United States. That is happening at a furious pace right now as Trump has made America almost overnight the best and most reliable place in the world to invest. Steel and aluminum import tariffs work decisively against this goal.
Ronald Reagan in the 1980s invoked anti-dumping provisions against Japanese steel. It was one of his few decisions he later confessed he wishes he hadn't made. Trump will come to learn the same thing, and we hope it is sooner, not later.