One of the ironies of trade protectionism is that tariffs and import quotas are what we do to ourselves in times of peace and what foreign nations do to us with blockades to keep imports from entering our country in times of war. Or consider that we impose sanctions on U.S. enemies such as North Korea, Russia and Iran because we want them to feel the economic pain of being deprived of imports. But now we are imposing sanctions on our own country by punishing with tariffs in order to make Americans more prosperous. If ever there were a crisis of logic, this is it.
Donald TrumpDonald TrumpTrump takes shot at new GOP candidate in Ohio over Cleveland nickname GOP political operatives indicted over illegal campaign contribution from Russian national in 2016 On The Money — Dems dare GOP to vote for shutdown, default MORE genuinely believes that his steel and aluminum tariffs will save thousands of blue-collar jobs. We know from our interactions with him that he truly cares about these workers in Pennsylvania, Ohio and other Rust Belt states. We do too and we don't want factories to shut down. But even if tariffs save every one of the 140,000 or so steel jobs in America, it puts at risk five million manufacturing and related jobs in industries that use steel. These producers now have to compete in hyper-competitive international markets using steel that is 20 percent above the world price and aluminum that is 7 percent to 10 percent above the price paid by our foreign rivals.
Trump should also examine the historical record on tariffs, because they have almost never worked as intended and almost always deliver an unhappy ending. The Smoot Hawley tariff of 1929 signed into law by Herbert Hoover gave us the Great Depression and worsened it. Richard Nixon’s 10 percent import surcharge contributed to the stagflation of the 1970s. George W. Bush tried to save the steel industry by imposing tariffs on steel. If those tariffs worked, we wouldn't be having this discussion today. We tried to save the color television industry with protectionist measures. Instead, they wiped out domestic production.
We aren’t persuaded by the Trump administration’s claim that we need to impose these tariffs for national security reasons. Despite stiff competition from imports, many specialty steel producers are doing just fine and actually exporting steel to Mexico and Canada. Meanwhile, Canada is the No. 1 exporter of steel to the United States. Does anyone really believe Canada is a national security threat to the United States?
What does worry us is that Canada and Mexico are now both threatening retaliatory tariffs against America. This tit-for-tat trade breakdown could put the North American Free Trade Agreement in serious jeopardy. That could inflict severe economic damage to all three nations, and a stock market meltdown.
Trump should continue to make American producers more competitive in global markets through tax, regulatory, energy, and other pro-America policy changes that bring jobs and capital back to the United States. That is happening at a furious pace right now as Trump has made America almost overnight the best and most reliable place in the world to invest. Steel and aluminum import tariffs will work decisively against this goal.
In the early 1980s, Ronald Reagan’s invoked anti-dumping provisions against Japanese steel. It was one of his few decisions he later confessed he wishes he hadn’t made. Trump will come to learn the same thing, and we hope it is sooner, not later.
Larry Kudlow is an economic commentator with CNBC. Arthur Laffer is president of Laffer Associates. Stephen Moore is a senior fellow at the Heritage Foundation. They are founders of the Committee to Unleash Prosperity and served as advisors to the 2016 Donald Trump campaign.