The Trade Partnership, a group of trade economic analysts, reports:
We find the tariffs would indeed have positive impacts on U.S. steel and aluminum producers, but negative impacts on producers who use steel and aluminum, both imported and domestically-produced. Those impacts, both positive and negative, would ripple through the economy. …
More than five jobs would be lost for every one gained; Job losses in other manufacturing sectors (-36,076) would cancel out the job gains in the steel- and aluminum producing sectors, with particularly large “hits” to workers in the fabricated metals sector (-12,800), motor vehicles and parts (-5,052), and other transportation equipment (-2,180) … Two thirds of the lost jobs affect workers in production and low-skill jobs.
In other words, for the hardest hit by global dislocation and automation, President Trump’s tariffs would be one more blow.
There is more than speculation to support the conclusion that tariffs are bad for America. James Pethokoukis of the American Enterprise Institute explains: “The 2002 Bush II tariffs worked out pretty much just as economists predicted. They raised steel prices, which hurt US firms that use steel. They may have even cost more jobs in steel-consuming sectors than actually existed in the US steel industry.”
What is abundantly clear is that Trump has no idea what he is talking about. “Our country on trade has been ripped off by virtually every country in the world, whether it’s friend or anybody — China, Russia, people we think are wonderful, the European Union,” Trump said. “We lost $800 billion a year on trade. Not going to happen.” We didn’t “lose” anything; the trade deficit is not a budget deficit. It is simply the difference in value between what we export and what we inport. The hitch: Those dollars flowing to China, the E.U. and elsewhere come back to the United States in the form of investments, providing millions of jobs. As Pew pointed out, “Foreign-owned companies employed 6.8 million workers in the United States in 2015, up 22% from 2007, according to preliminary data from the U.S. Bureau of Economic Analysis.”
America’s chronic trade deficits, however, stem from Americans’ decisions not to save much of their money, not from dumb trade deals. And, if you compare trade deficits to jobs growth, they are positively correlated: In other words, when jobs are plentiful, Americans buy lots of stuff, including imports. (The irony here is that, if Trump’s tax plan actually stimulates the economy, it is likely to lead to even wider trade deficits, perhaps giving Trump even more reason for further tariffs.)
In one quite possible and dangerous scenario, Trump’s move will fuel a protectionist fire that takes out one industry after another. An arsonist with a plan to burn down one structure may find that his conflagration takes down a slew of buildings. Pethokoukis worries that “trade hawks in the Trump White House such as economist Peter Navarro may well want to undermine the entire global trading system — including the World Trade Organization and global supply chains — that has led to postwar peace and prosperity, and brought hundreds of millions of our fellow humans out of deep poverty. They are nationalists who may be willing to tolerate a poorer, more insular America in the name of greater sovereignty and less economic disruption.”
Before we get to that point, one would hope that even the GOP-led Congress, as passive and Trump-obedient as it is, would seek to legislatively fix this by withdrawing the president’s unilateral authority to apply tariffs in the guise of national security. (Canada is the leading foreign source of steel and poses absolutely no national security threat — at least at this stage in Trump’s disaster-filled presidency.) The European Union lashed out when Trump initially announced his tariff plan. (CNBC reports: “European Commission President Jean-Claude Juncker responded by suggesting the EU raise tariffs on iconic American products popular in Europe like Harley Davidson motorcycles, Kentucky bourbon and Levi’s jeans. On Saturday, Trump hit back by threatening to hit car exports from the EU with a retaliatory tax.”)
On the macro level, the risk of a protectionist contagion slowing many countries’ growth is real. But for Trump’s voters, the lesson is that while flailing at foreigners may provide emotional satisfaction, it is entirely counterproductive, and indeed, will hurt us in ways that exceed the original “problem” — if there is one. With nearly full employment and low inflation, what exactly is the problem Trump is trying to fix? One suspects it has more to do with assuaging his ego, displaced anger over the Russia investigation that is closing in and the never-ending drama in the White House.
Next time, voters might try electing someone with a modicum of economic literacy and an adult temperament.
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