The senseless and destructive trade war President Trump has launched is bad for a whole slew of reasons. It’s a tax on American consumers, potentially inflationary, is likely to depress foreign investment and hiring in the United States, and is antithetical to our most critical alliance. And there is one more.
The largest U.S. aluminum maker wants an exemption from tariffs designed to bolster domestic metal production.
Alcoa Corp. on Monday asked the Trump administration for an exemption from tariffs on aluminum imported from Canada, where the company makes a raw form of the metal that it rolls into sheet for beverage cans at a U.S. plant. . . .
Aluminum prices have risen as buyers began to anticipate the implementation of tariffs. Alcoa said it still can’t justify the investment that would be necessary to restart some of its idle smelters in the U.S.
Alcoa is the largest producer of raw aluminum in the U.S., but the U.S. accounted for only 14% of the aluminum Alcoa produced globally last year. The company wants the Commerce Department to grant tariff relief on 40,000 metric tons a year of specialized alloys that Alcoa uses to make aluminum sheet for cans.
Mark J. Perry of the American Enterprise Institute explains, “One economic lesson here is that America’s large corporations operate in an international marketplace with extensive global supply chains for inputs, and extensive markets overseas for the sale of their final products. In the case of Alcoa, more than half of its sales are outside the U.S., and those exports are at risk from the inevitable retaliatory tariffs that will result from Trump’s insane and dangerous trade war.” But Alcoa is a big company with plenty of lobbyists and connections in Washington. It can therefore take the tariff (in effect, rigging the market) and rig it in its favor, leaving less-connected firms at an even greater disadvantage. In other words, tariff policy helps the rich get richer and makes those who are less politically connected poorer.
The Alcoa case, Perry reminds us, is also an admonition of the law of unintended consequences, “since protectionist politicians can never predict the myriad long-term costs imposed on the economy from their ‘America first’ trade follies that make American companies, workers, consumers, and shareholders ‘last’ in practice.” In this case, however, that the unintended consequences included higher prices for companies that use aluminum as well as steel — which Trump also subjected to a tariff — was entirely foreseeable.
Speaking of steel, Trump covers up his disastrous policy by lying, falsely claiming that six new steel plants are opening. When you have to flat-out lie about nonexistent mills, there is a good chance your policy is a flop.
The failure of a trade war should come as no surprise to just about every economist not employed by Trump. It was widely predicted that the economic impact of tariffs would far outweigh any temporary benefits. The Trade Partnership report, one of many released as Trump headed down the protectionist path, warned in March:
The tariffs and retaliation would increase U.S. steel employment and non-ferrous metals (primarily aluminum) employment by 26,346 jobs, but cost a net of 495,136 jobs throughout the rest of the
economy, for a total net loss of nearly 470,000 jobs; Eighteen jobs would be lost for every steel/aluminum job gained. . . .
Every U.S. state will experience a net loss of jobs as a result of the steel and aluminum tariffs and retaliation. Heaviest hit are California, Texas and New York. But noteworthy are large net employment
losses in the states in which the steel and aluminum sector figures prominently: Illinois (-17,950), Indiana (-7,282), Michigan (-14,021), Ohio (-15,718), Pennsylvania (-16,535) and Wisconsin (-8,964).
The president is immune to logic and evidence; he’s convinced someone is ripping us off, so taxing American consumers (that’s what a tariff is, a tax) is the way to go about fixing the non-problem of the trade deficit. (Has he noticed how low unemployment is while the trade deficit sets new records?) Maybe not even he believes that economic nonsense.
Trump’s trade policy is simply one more manifestation of his white-grievance, populist politics — an irrational scheme meant not to solve problems or improve the lives of those who supported him, but to provide an unending supply of bile, as well as resentment and fear of foreigners. We’ll see if voters are more clear-eyed than Trump thinks they are.