The Truth About The Proposed Steel Tariffs



Last Thursday, President Trump announced a series of import taxes on steel and aluminum, in the interest of protecting national steel industries that have been falling behind for decades.

These new taxes would slap an incredible 25% charge on foreign steel and 10% on aluminum, regardless of country. Though he’s mostly accused China of out-competing the US in cheap steel production, the lion’s share of imported steel does not come from China, but rather Canada, South Korea, Mexico, and Brazil, with minor contributions from some 15 other countries. Consequently, the tariffs are likely to apply broadly to imported steel from all countries.

Concerningly, the President of the European Commission has promised to respond in kind, should Trump follow through with these tariffs, stating “We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk.”

It is very likely that when the tariffs take effect, Europe, Canada, and other major United States trading partners will place their own tariffs against imports from America in the interest of leveling the balance of trade. This has been historically true for many countries, who engaged in “trade wars,” locked in a battle of ever-increasing tariffs on each other’s imports, depriving consumers of products and stagnating trade until an agreement is reached. Much of the issue is that the mechanism that we understand as "price" comes from the aggregation of subjective valuations, and therefore what constitutes being "ripped off" is highly subjective.

President Trump has stated his willingness to engage in a trade war, stating via Twitter that “trade wars are good, and easy to win.” However, that may not be the case, and imposing artificial interventions upon the free exchange of goods around the world would be decidedly in violation of his party’s commitment to free trade.

As a result, others in the Republican Party are understandably conflicted. Even Speaker of the House Paul Ryan, noted for collaborating with Trump on tax reform, stated tariffs would jeopardize all the economic gains the administration had overseen so far.

Trade wars are generally predicated upon an outdated notion that the government must protect all national industries from any competition. That is done by forcing the competition’s goods to be more expensive than the national companies’ via taxes. However, when foreign countries see their competitor unfairly harming their demand, they impose their own tariffs. The result is higher prices, scarcity of resources and sluggish economic growth as both consumers are less able to afford to buy new goods and services, and producers must spend more on materials.

The answer to such destructive, artificial trade obstruction is to stop it all. Economics has shown the world repeatedly that the best indicator of the value of goods and services comes from the public’s willingness to buy, and how much of it there is, not from state-determined prices. To cut the consumer base off from another’s product in the because of nationality is inherently anti-competitive and will deprive Americans of the benefits of comparative advantages.

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