President Trump's tariffs announcement yesterday ... 25% on steel and 10% on aluminum ... has roiled the stock market and the emotive pronouncements of "free-traders" on cable TV. My reactions to this event are fourfold:
1 - I agree with Trump that these two industries are vital to the U.S.'s strategic defense future and keeping these capabilities vital and at home is worth the risk and the price.
2 - Trump has been accused of letting his business interests influence his policy decisions as president. These tariffs will increase the prices of two materials that are used in the construction of large buildings -- a Trump business mainstay.
3 - Since the United States has trade deficits with just about every country in the world, retaliation to Trump's move by other countries should be far more damaging to them ... maybe even suicidal.
4 - Like what has happened with other industries (like the autos) ... it is quite possible that foreign producers might retaliate by just moving their manufacturing into the U.S. This would also be good for our employment levels and increase level-playing-field competition within. This is good.
So, don't panic quite yet.
Trump shoots from the hip after meeting with some depressed industry. Let’s hope the whale oil and buggy whip industries don’t get his ear. We import most of our cold rolled and forged steel from Canada and the EU. We produce specialty steels here and are near capacity. If Trump wanted to rebuild the American steel industry wisely, he’d locate them on the Mexican border to build a steel wall.
ReplyDeleteThe auto industry will move out of the US if their raw materials are hit with high tariffs but their finished goods are not. The global steel producers will likely lash back with tariffs that will likely suppress exports of our bourbon, dairy, oranges, beef, chicken, grains, lumber, paper. That'll shrink companies with significant export markets. So we could end up gaining steel jobs and losing 2X others.
Again, I think Trump is right. Trade wars might hurt us, but they will distort the other sides. We cannot keep posting trade deficits like we currently have. And if China dumps our debt, it will lose hundreds of billions of dollars. Trumps business experience helps him here.
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