After a great deal of confusion of what was going on, Trump announced on Thursday that he is placing large tariffs on steel and aluminum, using a rarely-invoked authority to impose trade restrictions deemed vital to national security. This is a very, very bad idea.
President Trump on Thursday said he has decided to impose punishing tariffs on imported steel and aluminum in a major escalation of his trade offensive, disappointing Republican congressional leaders and inviting retaliation by U.S. trading partners.
Speaking at the White House, the president said he has decided on tariffs of 25 percent for foreign-made steel and 10 percent for aluminum.
“We’ll be imposing tariffs on steel imports and tariffs on aluminum imports,” the president said. “…You will have protection for the first time in a long while, and you’re going to regrow your industries.”
This is one of the places where some on the right and left agree. Labor unions generally support this kind of protectionism, as do paleo-conservatives on the right. But economists are pretty much unified in thinking it’s a very bad idea, and for good reason. The Washington Post reports that his own Chief Economic Advisor, Gary Cohn, opposed the idea and tried to talk him out of it. In fact he thought he had talked him out of it, then Trump suddenly called this unscheduled event, called in the press and announced the new tariffs. Cohn may well resign over it.The stock market immediately dropped more than 2% on Thursday, in anticipation of a new round of trade wars that the global trading system under the World Trade Organization and GATT were supposed to avoid. Other countries are already planning to retaliate and to challenge the new policy as treaty violations, which they almost certainly are. There will be complaints filed with the WTO and the whole thing could turn out very badly.
Those who want to turn America into an isolated fortress are trying to put the toothpaste back into the tube. Material and capital cross borders in the modern world and there’s nothing anyone can do to stop that. The solution is not to try to turn back the clock to an earlier time that technology simply won’t allow anymore. And trying to do so isn’t just futile, it’s dangerous and could very well end with another recession.