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Trump Plans to Hike Tariffs on Steel and Aluminum

Tuesday, March 06, 2018
Sandler, Travis & Rosenberg Trade Report

President Trump announced March 1 that he plans to impose additional import tariffs of 25 percent on steel and 10 percent on aluminum. The news was met with sharp criticism by many Republicans, business groups, and trading partners but was welcomed by Democrats and steel and aluminum manufacturers. There is growing concern that the tariffs could prompt retaliatory measures by other countries.

Trump is expected to formally order the tariffs during the week of March 5. However, the exact products and countries to be targeted are unknown, as is a possible effective date. It is also unclear how long the tariffs may remain in place, though Trump told steel and aluminum industry executives he would give them “protection for a long time.”

The tariffs were roundly condemned by congressional Republicans. Senate Finance Committee Chairman Orrin Hatch, R-Utah, called them “a tax hike the American people don’t need and can’t afford.” A spokesman for House Speaker Paul Ryan, R-Wis., said Ryan “is hoping the president will consider the unintended consequences of this idea and look at other approaches before moving forward.” House Ways and Means Committee Chairman Kevin Brady, R-Texas, said “blanket tariffs that sweep up fairly traded steel and aluminum can backfire and harm our businesses and workers.”

Industry groups representing businesses and agriculture, which could be among the foremost targets of any foreign retaliatory measures, also registered opposition and called for a reconsideration. Some pointed out that an estimated 200,000 jobs were lost in downstream industries when tariffs on steel saw a similar increase in 2002. Others worried that trading partners could respond in kind or adopt national security-related import restrictions of their own. Press reports indicate that these concerns were responsible for a noticeable drop in the stock market after Trump’s announcement.

However, the announcement had its supporters as well. Senate Finance Ranking Member Ron Wyden, D-Ore., said he was “pleased that the president … finally intends to take action,” though he reserved further judgment pending additional details. Sen. Sherrod Brown, D-Ohio, said “this welcome action is long overdue” for steelmakers in his state. AFL-CIO President Richard Trumka called the tariffs “a great first step.”

Observers say the tariffs are likely to have the biggest impact on the biggest foreign suppliers of steel and aluminum to the U.S. market. As a result, major trading partners are warning that they will take steps to protect their interests if the tariffs are imposed. The EU said it will soon propose “WTO-compatible countermeasures” against the U.S., which reports say could target items like motorcycles, bourbon, and jeans produced in the home states of key congressional leaders. Canadian trade minister Chrystia Freeland said tariffs on Canadian steel and aluminum would be “absolutely unacceptable” and would prompt Ottawa to take “responsive measures.” China is said to be considering import restrictions against U.S. soybeans, which count China as a significant market, and Mexico reportedly has plans to levy retaliatory duties as well. Several countries are also expected to file WTO complaints.

While there is some speculation that Trump could ultimately scale back the tariffs, the president himself suggested that will not be the case. He brushed off predictions that the measures could launch a rapidly escalating trade war, stating via Twitter that “trade wars are good, and easy to win.”

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