Trade wars don't appear to be the easy wins we were promised

Trade wars don't appear to be the easy wins we were promised
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President TrumpDonald John TrumpWarren defends, Buttigieg attacks in debate that shrank the field Five takeaways from the Democratic debate in Ohio Democrats debate in Ohio: Who came out on top? MORE is escalating trade hostilities once again with the announcement of aluminum and steel tariff exemptions coming to an end for Canada, Mexico and members of the European Union (EU).

The news arrives months after the initial trade adjustment in March that imposed a 25-percent tariff on steel imports and 10-percent tariff on aluminum imports for many U.S. trade partners.

Flat-rolled steel, steel tubes and pipes and unwrought aluminum make up the highest import values on the list of products included in the tariffs, which I highlight in my report for consumer research group ValuePenguin.

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On average, the U.S. imports over $3 billion worth of each of these three commodities per year to be used for a wide array of purposes, such as automobile manufacturing, aircraft manufacturing, shipbuilding, appliance manufacturing and construction.

 

Canada accounts for the highest value of aluminum and steel imports included in the tariff at an estimated $11.5 billion per year, with China in second at $7.74 billion per year and Mexico in third at $2.87 billion.

South Korea and Japan also provide high import values of aluminum and steel products and, when combined, the members of the EU provide an estimated total of $7.9 billion in imported aluminum and steel products each year for the U.S.

Originally, Argentina, Australia, Brazil, South Korea, Canada, Mexico and the EU had all been exempt from the tariff. The decision to punish U.S. allies — Canada, Mexico and the EU — comes as an unexpected shock for many Americans and Non-Americans alike.

Senator Ben Sasse (R-Neb.) emphatically stated, “This is dumb. Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents."

These U.S. allies are also unmistakably valuable sources of aluminum and steel for many U.S. industries. Canadian Prime Minister Justin Trudeau said at a press conference Thursday

“Canada is a secure supplier of aluminum and steel to the U.S. defense industry, putting aluminum in American planes and steel in American tanks. That Canada could be considered a national security threat to the United States is inconceivable.”

Canada is the top contributor of imported aluminum and steel products in the U.S. and together, Canada, Mexico and the EU account for 52.3 percent of the total imported aluminum and steel product value covered by the tariff, which translates to an estimated total imports value of $22.3 billion each year.

The tariffs have been presented with the intention of protecting the U.S. economy and promoting national security according to the Section 232 proclamation, but retaliatory tariffs from affronted trade partners can only do what they’re designed to: hurt U.S. industries until an agreeable trade deal is reached for all parties involved.

Will they be able to reach a deal in time without doing too much damage to the U.S. economy?

When China imposed tariffs of its own earlier this year in retaliation to the aluminum and steel tariffs, the tariffs were largely targeted at the aircraft, automobile and soybean industries. Now, with the recent decision to include Canada, Mexico and the EU in the tariffs, more retaliation threats have already started rolling in.

Mexico has already proposed tariffs on pork bellies, apples, cranberries, grapes, cheeses and flat-rolled steel from the U.S. The Canadian prime minister also announced that Canada would respond with its own share of penalties on U.S. imports.

Reuters noted that the European Commission, which is responsible for coordinating trade policies within the EU, has threatened to respond with tariffs of their own on imported U.S. motorcycles and whiskey, products that account for $3.4 billion worth of U.S. exports.

Tensions from Trump’s escalating trade war between the U.S. and its allies have also been rubbing stock markets the wrong way, CNN Money reported a 250-point drop in the Dow Jones Industrial Average following the announcement of tariffs.

Once again, President Trump’s boast that a trade war would be “easy to win” rings loudly in memory, and waiting for trade negotiations to come through has not been a pleasant experience for anyone.

Commerce Secretary Wilbur RossWilbur Louis RossDemocrats inch closer to issuing subpoenas for Interior, EPA records Overnight Energy: Dems subpoena Perry in impeachment inquiry | EPA to overhaul rules on lead contamination tests | Commerce staff wrote statement rebuking weather service for contradicting Trump Commerce staff drafted statement rebuking weather service for contradicting Trump's hurricane predictions MORE admitted that NAFTA talks are taking longer than previously hoped for and that their status “did not justify continuing exemption from the tariffs based on the national security considerations of the overall situation.”

That and Trump’s renewed tariff threats against China, despite the U.S. and China having recently reached a truce, are bringing us to the brink of a global trade war that America and her economy can’t afford to be a part of.

David Ascienzo, Ph.D., is a data scientist at consumer research group ValuePenguin.com. He conducts research and analysis on a variety of topics that directly impact the American consumer.