Former WH economists argue steel tariffs would hurt US economy, diplomatic ties

Former WH economists argue steel tariffs would hurt US economy, diplomatic ties
© Getty Images

Fifteen former Democratic and Republican White House economists are urging the Trump administration to forego imposing tariffs on steel imports over national security concerns.

The group of White House Council of Economic Advisers heads said levying taxes on steel coming into the United States would cause economic harm and generate diplomatic tensions.

ADVERTISEMENT
The Trump administration is soon expected to announce a decision as to whether steel tariffs are needed under Section 232 of a 1962 trade law that provides the president with the power to slap tariffs on imported steel over national security concerns.

“We urge the administration not to take this action," the economists wrote in a letter to President Trump on Wednesday.

The economists noted that while U.S. steel imports come from more than 110 countries and territories much is sold to the United States by important allies such as Canada, Brazil, South Korea and Mexico.

“The diplomatic costs might be worth it if the tariffs generated economic benefits," the economists wrote.

"But they would not. Additional steel tariffs would actually damage the U.S. economy. Tariffs would raise costs for manufacturers, reduce employment in manufacturing and increase prices for consumers."

The letter, which was spearheaded by the conservative American Action Forum, was accompanied by an analysis that found steel tariffs would likely harm the U.S. economy by driving up domestic steel costs, for U.S. manufacturers, consumers and the nation's closest allies.

Overall, the analysis found that Section 232 investigations are rarely utilized and have only resulted in two prior import restrictions. 

Tariffs also would likely result in retaliation from U.S. trading partners such as China and the European Union. 

Officials from Canada, United Kingdom, the European Union, Germany and the Netherlands have expressed concern about the possibility that any new tariffs would disproportionately hit them. 

Last month, Canadian Prime Minister Justin Trudeau said he told Trump that Canada’s steel imports aren't threat to U.S. security.

The economists argued that emergency steel tariffs put in place in 2002 under President George W. Bush didn't work to boost the economy or the manufacturing sector.

Bush lifted the tariffs a little more than a year later after a strong backlash that led to threats of retaliation from U.S. allies. 

The World Trade Organization then ruled against the steel tariffs. 

China’s overcapacity of steel has been the biggest source of angst. But moves by the Obama administration last year made it harder for Beijing to sell cheap steel here. 

The United States already has more than 150 countervailing and antidumping duties on steel imports, some as high as 266 percent, the economists said.

During the campaign, Trump condemned China's unfair trade practices and vowed to bolster U.S. manufacturing by imposing tariffs on foreign steel.

A Commerce Department report was expected by the end of June but has been delayed because talks are ongoing at the Pentagon over the potential effects of new steel tariffs.

Commerce Secretary Wilbur Ross said last month that Trump intends to take “bold action” on steel imports that threaten U.S. security.

The signers of the letter include: Obama administration: Jason FurmanJason FurmanFormer WH economists argue steel tariffs would hurt US economy, diplomatic ties Economy adds 222K jobs in June, beating expectations Economists support Trump's pick to lead White House economic council MORE, Alan Krueger, Austan Goolsbee and Christina Romer; George W. Bush administration: Ben Bernanke, Edward Lazear, Glenn Hubbard, Greg Mankiw, and Harvey S. Rosen; Bill ClintonBill ClintonTrump approval rating sets new low in second quarter: Gallup OPINION | How Democrats stole the nation's lower federal courts Trump legal team spokesman resigns MORE White House: Martin Baily, Joseph Stiglitz and Laura Tyson; Michael J. Boskin, from the George H.W. Bush administration; Martin Feldstein from Ronald Reagan's administration and Alan Greenspan, who served under Gerald Ford.