Despite being implored against this decision by industry experts and lobby-groups, President Donald Trump imposed tariffs that could have deep implications for the U.S.
With talks of NAFTA renegotiations on a brief hiatus, President Donald Trump made an announcement that could not only complicate that process, but fuel the ever growing fire that is an impending trade war.
In late May, President Trump announced that he’d be imposing steep tariffs on steel and aluminum imports from the EU, Mexico, and Canada—the U.S.’s biggest trading partners. All three of which, following the announcement, immediately announced plans to retaliate with tariffs of their own against American products.
President Trump’s decision to impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum was done so under a 1962 law which grants the president the authority to adjust tariffs on goods depending on their threat to national security.
“We take the view that without a strong economy, you cannot have strong national security,” said Wilbur Ross, United States Secretary of Commerce.
Up until this announcement, the EU, Mexico, and Canada had all been exempt from the worldwide steel and aluminum tariffs President Trump imposed in March.
In 2017, the U.S. imported $47.83 billion of aluminum and steel commodities. That price only represents two percent of the $2.34 trillion in goods imported by the U.S.
The Repercussions on U.S. Economy
In the last few months, premiums for American steel and aluminum have increased by nearly 50 percent in comparison to metal bought in Asia and Europe, wrote Mark Niquette of Bloomberg.
While this indicates that the steel and aluminum industries are benefiting from the Trump tariffs, other industries are not faring so well.
Business lobby-groups ranging from the American Petroleum Institute to The Alliance of Automobile Manufacturers and the American Beer Institute have denounced the Trump tariffs as it would directly affect their industries due to their use of these resources.
“Months ago, the U.S. Chamber warned that alienating our strongest global allies by launching a tit-for-tat trade war would harm the U.S. economy and undermine American leadership,” implored Myron Brilliant, Executive Vice President and Head of International Affairs at the U.S. Chamber of Commerce.
With Goldman Sachs estimating that the Trump tariffs stand to boost inflation by 0.01 percentage points, it is clear their effect on America’s economy will not be large, according to The Economist. However, it’s the construction industry that’s expected to receive the heaviest brunt of the Trump tariffs.
Construction prices are expected to increase only by 0.2 percent. In other words, a new home costing $300,000 is estimated to now cost $614 extra.
Nonetheless, the construction industry is already struggling with rising material costs, and despite housing construction not expecting too high of a cost increase, it is important to consider how this would impact much larger projects such as industrial high-rises and office buildings.
Additionally, the Trump tariffs could impede construction industry growth as well as job creation.
National Relations and the Global Economy
The Trump tariffs were predicted to not bode well with our greatest allies. With the EU, Mexico, and Canada all announcing plans to impose tariffs in retaliation, it seems the predictions were accurate.
Mexico suggested its retaliatory tariffs will be on:
- American lamps
- flat steel
Europe’s retaliatory tariffs would aim at products such as:
- cranberry juice
- peanut butter
Canada’s focus for it’s retaliatory tariffs would cover:
- orange juice
- toilet paper
- washing machines
- lawn mowers
But it’s the ones on aluminum and steel that appear to be the most significant at this point, $12.8 billion worth, to be precise.
The Trump tariffs are a threat to the global economy in the sense that they have undone the work of the international trade order over the past 25 years.
Additionally, the U.S. represents the world’s foundational economy and it is now violating some of the most fundamental rules with the Trump tariffs, as Matt Gold, former Deputy Assistant U.S. Trade Representative, explained:
“It has severe implications for undermining the credibility of the entire global trading system, in addition to the fact that it will bring litigation to the World Trade Organization by our trading partners for violation of those rules.”
“Today is a bad day for world trade,” added Cecilia Malmström, EU trade commissioner. “We did everything to avoid this outcome.”