Trump stirs trade concerns with new tariffs on metals
President Trump is scheduled to enact new tariffs on steel and aluminum this weekend, a politically risky move that threatens to revisit trade tensions in an election year.
The tariffs, covering nearly $500 million of goods, come on the heels of two significant trade accomplishments: signing a preliminary deal with China and updating the 1994 North American Free Trade Agreement (NAFTA).
The pursuit of new tariffs suggests Trump might not set aside all of his trade fights heading into his reelection bid.
Trump made his first foray into the trade wars that have come to define his presidency in March 2018, when he imposed 25 percent tariffs on steel and 10 percent tariffs on aluminum, largely keeping the tariffs confined to the raw materials.
While those tariffs were designed to protect domestic steel and aluminum manufacturers, economists warned that they would distort markets and increase prices, potentially making life difficult for some producers.
Subsequent tariffs to protect those kinds of manufacturers are known as “cascading tariffs,” and the tariffs slated to take effect Saturday designed to cover products made from raw steel and aluminum, such as nails and automobile bumpers.
“This latest action was significant because, explicitly for the first time, Trump was imposing new tariffs to help an industry suffering because of his previous tariffs,” said Chad Bown, a trade expert at the Peterson Institute for International Economics in Washington.
According to Bown, the new tariffs will cover roughly $449 million worth of imports, significantly less than the metal tariffs that covered about $47 billion and the $370 billion in tariffs for Chinese goods.
The new tariffs could help alleviate pressure on some manufacturers in key battleground states. Trump is hoping to repeat the 2016 hat trick of winning Pennsylvania, Wisconsin and Michigan, where manufacturing plays an outsize role.
Still, Bown argued, the latest move illustrates how tariffs often beget more tariffs.
The upcoming tariffs will hit industries like construction that could in turn begin demanding the administration extend protections to their industries.
Jacqueline Varas, an analyst at the right-leaning American Action Forum, estimates that Trump’s tariffs will cost consumers $78 billion a year overall.
“Trade barriers such as tariffs increase the cost of both consumer and producer goods and depress the economic benefits of competition, inhibiting economic growth,” she said.
Perhaps more urgently, the new tariffs could indicate Trump’s recent trade war pause will be short-lived.
Trump put his trade war with China on hold last month by signing a preliminary “phase one” deal that halted the tariff regime he put in place, scaled back certain parts of it and scrapped additional measures from taking effect.
The new tariffs, however, will affect $72 million of Chinese imports. They will also contravene a partial trade deal with Japan that Trump agreed to in December by imposing tariffs on $61 million worth of imports.
But the new round exempts $270 million of imports from Canada and Mexico, which could have caused a stir just a week after Trump signed The United States-Mexico-Canada Agreement, delivering on a 2016 campaign promise to update NAFTA.
On Capitol Hill, some critics, including Republicans, have raised concerns that the new tariffs might be illegal. Trump relied on a national security argument to impose the original steel and aluminum tariffs, but legal analysts say the derivative tariffs are not covered in the Commerce Department report justifying those trade barriers.
Among those concerned are Senate Finance Committee Chairman Chuck Grassley (R-Iowa), who has been critical of Trump’s trade policy and previously floated legislation to limit the president’s trade authority.
“Chairman Grassley has questions about how the Commerce Department reached its conclusions that led to the imposition of tariffs and will be looking into the matter further,” a Grassley spokesman said.
But Trump may be hesitant to stir the pot in a more significant way with just nine months until Election Day.
A recent survey of CFOs found that their top concern was trade policy, and stock markets have seen some of the declines of his administration in response to escalating trade wars.
With that backdrop, and with the economy as a centerpiece of his reelection campaign, Trump may choose to keep any new tariffs to a minimum.