We applaud the administration's efforts to rebalance trade and protect the USA steel industry and workers, but we are concerned that global import tariffs on steel and aluminum would have a devastating effect on steel-consuming manufacturers downstream, including the auto care industry.
Commerce's steel report determined that steel, and domestic steel production, is essential to national security, including "defense requirements" and "U.S. critical infrastructure sectors including transportation systems, the electric power grid, water systems, and energy generation systems".
We saw this problem before when USA president Richard Nixon imposed a 10 per cent surcharge on Canadian imports back in the early 1970s. Mexico and Canada won an exemption - for now - by holding out the possibility of better NAFTA terms for the U.S. The European Union is also willing to talk, despite some harsh anti-Trump rhetoric.
Early on, Trump withdrew from the TransPacific Partnership, denounced by the far left and right, but conceived as countering Chinese influence, while boosting intellectual rights protections and lowering tariffs on agricultural exports. A week later, as expected, he signed proclamations calling for restricting those imports.
Is refusing to engage in the current unequal trade relations so insane? "So, the economy is set to accelerate and no one will be able to tell how much more it could have grown without the tariffs".
Steel tariffs, however, don't follow this pattern. Deere's shares fell 2.5 percent after Trump announced tariffs were formally being considered.
Nor will the tariffs bring back good jobs at steel and aluminum factories. The move will certainly come as a huge burden to Korean steelmakers. Except that our trade deficit with China previous year was $375 billion.
U.S. President Donald Trump last week said he would impose import tariffs of 25 percent on steel and 10 percent for aluminum, effective later this month, but exempted Canada after an intense lobbying campaign arranged by Ottawa. The U.S. has already imposed anti-dumping and countervailing tariffs on 88 percent of South Korean steel products.
Do the math. While imported steel will cost more, imports will drop from one third to one fifth of all steel used here. The tariffs take effect in about two weeks, which means the president could still change his mind.
Morgan Stanley estimated the impact of the tariffs as no more than 0.3 percentage point of USA gross domestic product, writing in a report that they were "unlikely to derail the global macro outlook".
Under U.S. trade law, Lighthizer isn't due to deliver the results of his probe until August. So, even if Korea is not given the exemptions, the government will have to continue its outreach efforts so it could get an exemption even after the period, or at least some Korean steel products might be excluded from the high tariffs.
Therefore, other countries may, with some justification, consider the new tariffs to be improper and move to impose their own measures in response.
More problematic than the USA tariffs is the likelihood that other countries will respond in kind. The Beer Institute, a trade group representing the world's largest brewers, estimates the 10 percent tariff on the aluminum encasing most beer sold in the US will push costs up by $348 million annually, threatening more than 20,000 jobs in the industry.
Roughly two-thirds of the 35 economists polled by Bloomberg expect the tariffs that Trump signed last week would cause a small decrease in jobs and a small drop in US economic growth, which is enjoying its third-longest expansion on record.
Last week the head of the WTO vilified Trump for putting the world at risk of a "trade war".
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