Economists are worried about the fall-out of US President Donald Trump’s plans to impose barriers on steel imports into the USA.
It has been argued that the effect would be catastrophic not only on the US steel industry, but on the country’s broader economy and trade infrastructure.
The potential for disaster is so strong that 15 former Chairs of the President’s Council of Economic Advisors, claims a report by NBC News, have written an open letter to 'The Donald' urging him to reconsider and laying out their arguments against tariffs.
In Europe there is already talk or retaliatory measures should Trump go ahead with his plans. Targeting Senate Majority Leader Mitch McConnell’s home state of Kentucky, a list of exports that will be targeted include Kentucky bourbon, according to the Financial Times.
But while the common wisdom is that China is the villain of the piece (and it has been in the past) today, claims NBC, Chinese steel represents just 3% of American steel imports, something Trump has acknowledged. Most of the steel flooding into the USA is from a variety of sources, including Germany, Canada and South Korea.
That said, there is a harsh reality here: back in the 1950s the US steel industry supported as many as 650,000 workers. Today it’s around 140,000 – hence Trump’s intentions to impose tariffs and quota restrictions on steel imports, according to the San Francisco Chronicle.
Online reports claims that Trump has recently described the USA as a ‘dumping ground’ for imported steel and told reporters on board Air Force One that he intends to put a stop to it.
Imposing tariffs and quotas, however, is not new. In 2002 George ‘Dubya’ Bush imposed tariffs of up to 30% on imported steel. The end result was that 200,000 steelworkers lost their jobs.
Then there is Section 232 of the 1962 Trade Expansion Act – that tariffs can be imposed if imports jeopardise domestic industries deemed vital to national security. According to the San Francisco Chronicle, only 3% of domestically produced steel is used by US defence industries.
The worst possible scenario? The World Trade Organisation ruling that imposed tariffs violate US trade commitments. Why? Because such a move might trigger a trade war between the US and its major trading partners, including the European Union – and who wants to pay more for a bottle of Kentucky bourbon?
Sources: NBC News, San Francisco Chronicle