This week, US President Donald Trump threatened via twitter to raise new, staggeringly large, tariffs on imported steel and aluminum, 25% and 10% respectively. According to some officials within the administration, however, this was impulse tweeting, and may not lead to anything concrete. The president has historically shown the propensity to make large threats and promises, and not follow through, and this may be another example.
NBC reports that one official within the White House claimed that Trump has become, “unglued,” this week over the constant tirade of damaging news and battering he has received. Hope Hicks’ Russia investigation testimony, followed by an alleged reprimand and her prompt resignation, John Kelly’s revocation of Jared Kushner’s security clearance, the still simmering controversies related to “Stormy” Daniels and lawsuit over the financial implications of the payout, led to his temper. The official then claims Peter Navarro, director of trade, and commerce secretary Wilbur Ross then channeled that anger, in advance of an unprepared for meeting with steel executives on Thursday morning. There had allegedly been absolutely no notes prepared, and any evaluation of tariffs policy was weeks away. Trump is then alleged to have impulsively decided on tariffs, and at higher rates than anyone had suggested to him.
In the following days, there was a stream of disparagement from Republicans, and apparent support from industrial state Democrats. The impact this will have on the steel industry remains to be seen, with many of the jobs lost in the steel industry incurred already in decades past, and a lack of industry will or need to bring those production jobs back in light of automation. Since the 1960’s the steel industry has seen employment drop from around 200,000 to about 30,000 today. Many of the jobs in the steel and aluminum industries, though, have shifted to secondary industries utilizing that cheaply produced steel and aluminum. The beer and automaker industries have both been heavily opposed to tariffs.
The US may end up continuing to import a portion of its steel, just at a higher price. Others are sounding the alarm bells about increased consumer prices, higher industrial costs, and blowback even on growth rates. The largest question, though, is whether these tariffs will ever be put into effect.
The EU has already threatened to retaliate against American imported goods, including agriculture, apparel, and vehicles. Canada is infuriated, and China and others have reportedly threatened to sue through the WTO, and there is growing speculation that this could start a trade war. Trump seems undeterred, but his party faces midterm elections this year, and the threat of any economic downturn could put significant Republican pressure on him to shelve these plans.
The legal basis of national security rationale also relies on the claim that steel needs to be manufactured domestically to preserve supply in the event of an international conflict. However, Canada’s inclusion in the tariff plan is said by some analysts to violate the legal security exclusion that Canada has relied on since the end of WW2, accepting them as part of the US defense industrial base. This could damage any WTO claims about national security concerns that may be filed.
In the end, pressure may mount until Trump eventually backtracks from the tariffs, but it remains to be seen what the final outcome will be.
Staff writer: Ari B