US tariffs on china products

Trump Decision to Ignite Trade War?

In a move that could set off a trade war, US President Donald Trump yesterday announced that the US would impose import tariffs on steel and aluminium.

The tariffs — 25% on steel and 10% on aluminium — came about after a US Department of Commerce investigation. The department determined that the US’ reliance on imports of steel and aluminium could amount to a national security risk in the event of a geopolitical incident forcing the US to rely on its own production.

US allies condemned the move, arguing that their countries were not a threat to US national security. As the biggest exporter of steel to the US, Canada was quick to respond to the proposed tariffs. Canadian foreign minister Chrystia Freeland said:

It is entirely inappropriate to view any trade with Canada as a national security threat to the United States … Should restrictions be imposed on Canadian steel and aluminium products, Canada will take responsive measures to defend its trade interests and workers.

The European Union was also critical of the US decision, vowing to retaliate with similar tariffs on US products. European Commission president Jean-Claude Juncker said in a statement:

We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification.

But it wasn’t only US allies threatening to respond in kind to the US tariffs. China is reportedly considering introducing tariffs on US soybean imports, which amounted to more than US$12.4 billion last year. 

Meanwhile, Mexico has requested an exemption from the new tariffs, citing the current trade relationship. Mexico claims it imported almost US$4.5 billion of US steel last year, while exporting US$3.6 billion of its own steel to the US during the same period.

Even some members of Trump’s own party are less than enthusiastic about the tariff. Senator Pat Roberts, Republican chairman of the Senate Agriculture Committee, commented:

Every time you do this, you get a retaliation and agriculture is the number one target … I think this is terribly counterproductive for the ag economy’.

The news drove stocks in US domestic steel and aluminium makers higher, but the Dow Jones industrial average sank 400 points.

Australian exports could also feel the effect of the new tariffs, with our country exporting $270 million in steel and $275 million of aluminium to the US each year.

President Trump’s latest decision seems certain to ignite a trade war, in which the US could ultimately be the big loser.

President Trump’s latest decision may prove to be counter-productive. While tariffs will help the US steel industry, they may not be such a good thing for the US manufacturing industry, driving the cost of imported steel and aluminium higher. The move has already upset countries the US has strong ties with and seems certain to ignite a trade war, in which the US could ultimately be the biggest loser.

By Craig Henderson

The Australian Tribune Editorial

The Australian Tribune Editorial

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