In Trump’s Trade War, Most of Us Lose
The NYT examines the likely effects of the tariffs on imported steel and aluminum that Trump stunned his own party and White House with on Thursday:
“The mills and smelters that supply the raw material, and that would directly benefit from the tariffs, have been shrinking for years. Today, those industries employ fewer than 200,000 people. The companies that buy steel and aluminum, to make everything from trucks to chicken coops, employ more than 6.5 million workers, according to a Heritage Foundation analysis of Commerce Department data.”
As most know, the Heritage Foundation is a conservative think tank, not some lefty operation. The numbers speak for themselves and eviscerate any potential economic case for Trump’s action.
Further, the 200,000 to 6.5 million ratio is just in steel and aluminum alone. Whether you factor in the reaction (e.g., Electrolux) and coming retaliation against other U.S. industries, which we are already seeing, as well as the increased costs this move would impose on other sectors such as the automotive industry, the disproportionate harm to American businesses, workers, and the U.S. economy will be even more stark.
And while the article above doesn’t discuss it, Trump’s tariff impulse is the same one behind Trump’s assault on alternative energy in the U.S. in favor of the dying coal industry. Capitalism has winners and losers, all the time; those who do not innovate do not succeed in the long run. And while you can put in protectionist and/or monopolistic constraints to stave off the inevitable, the inevitable eventually arrives. Alternative energy is the present and the future, and both economic and political stability will depend on the country’s ability to be energy-independent. The demand for cheap, clean fuel will continue to grow and Trump is ensuring that China, rather than the U.S., will be the economic winner of the race to develop those technologies. Short-term protectionism for the coal industry will hurt all Americans in the not-too-long run. The same short-sighted, ahistorical, economically irrational, reactive attempt to help a small slice of the steel and aluminum industries at the expense of everyone else, both within those industries and outside of it, will have grave repercussions that are easily predicted and are obvious — this is basic supply/demand.
It is clear that does not understand economics, and will not take advice from those who do. It is equally clear that he does not understand political economy. He appears not even to understand cause and effect.
One thing he does understand, however, is that Republicans do not want to lose the Pennsylvania 18th Congressional district seat in the special election being held on March 13th to Conor Lamb. The timing of the tariff seems an opportunistic political ploy; Trump’s opponent is backing these tariffs. Throwing the U.S. economy into turmoil and angering world leaders and setting off a massive trade war to attempt to retain a House seat seems as foolish as the tariff idea itself.
But it appears Trump’s own Commerce Secretary, Wilbur Ross, recommended the tariffs last month in the interest of national security. He claims the price increases on consumers of aluminum (such as Campbell’s soup) will be “trivial.” As for the coming trade war, Ross shrugged it off saying that in a war there will be “a few casualties” — and calling the negative reaction “hysteria.”
Ross’s comment ignores history. George W. Bush smacked a tariff on imported steel in 2002 to very poor results, just like the ones that are being threatened now. And neither Ross nor Trump mention that their new trade war is an unnecessary war of choice, apparently based on lack of intelligence; there appears to be no ground game, no clear strategic vision, and no international partners in the war. The last time we engaged in a war under these circumstances — also under George W. Bush — it didn’t go so well. Indeed we, and the world, are still paying the price.
