With gun control and immigration reform to worry about, it seemed like President Trump had enough on his plate to last him at least a few weeks. However, it is no secret that Trump does not play by the rules. Last Thursday, the president made an announcement that has taken news outlets by storm: the possibility of a trade war, a battle of high tariffs and quotas used to damage another country’s economy.
The word “war” in itself should immediately raise a red flag. It is a strong word for a reason and should not be used lightly, but Trump doesn’t seem to mind arousing conflict. He is planning to impose a 25 percent tariff on steel and a 10 percent tariff on aluminum, changes that would significantly alter the current trade order and alienate some of America’s most valued allies.
Like Newton’s law dictates, every action has an equal and opposite reaction. This situation is no different. While China has said it does not want to participate in a trade war, it has vowed to retaliate if necessary. The European Commission, the EU’s branch responsible for its businesses, has already started drafting a list of American products to levy if Trump follows through with the order. Estimates say the EU is planning to target $3.5 billion worth of goods, including clothing and other industrial products. Although Trump said Canada and Mexico could be exempt from tariffs if they comply with NAFTA requests, they have stated they would also be willing to retaliate if their economies are threatened.
But U.S. trading partners aren’t the only ones that lose big. There are no winners in this sort of war, no matter how many times Trump tweets, “trade wars are good, and easy to win.” Newsflash: they are most definitely not, specially when you are competing with multiple countries across the globe simultaneously. Once you partake in a conflict of such massive proportions, there is no going back. Different U.S. industries would be affected; automotive companies such as Ford and GM that manufacture cars using steel would face a significant rise in costs. Further, if the tariffs pass, the U.S. agricultural sector would surely be one of the main targets for retaliation, hurting farmers across the country (China, for instance, is the main consumer of imported U.S. soybeans, and could heavily hurt the industry). Even Trump’s political party would be affected by his impetuous decision. With midterm elections coming up this year, this type of political and economic crisis threatens Republicans in Congress. More importantly, consumers like you or me across the world would hurt if they saw a price increase. Once tariffs hit, car and industrial good prices aren’t the only ones that will shoot up – everything from soft drinks, to beers, to canned goods would be affected. Like Matthew Shay, the President of the National Retail Federation said: “Make no mistake, this is a tax on American families.”
It is worth asking why Trump would willingly upset so many of his nation’s trading partners and hurt his own economy at the same time (especially when so much has been going on at home). For one, Trump has repeatedly called out China for selling its products at prices below their own costs, otherwise known as “dumping.” In setting up tariffs, Trump attacks the Chinese trade industry as a whole. This claim, however, neglects to acknowledge that China is the main buyer of U.S. debt, meaning the U.S. trade deficit could increase.
Trump is also using this trade war as an opportunity to support the domestic manufacturing industry. Throughout his campaign, the president promised blue-collar workers that have lost jobs to competitive cheap labor to put “America first.” While aluminum and steelworkers would certainly benefit from the tariffs, the sector accounts for a small fraction of the country’s economic output. According to the Aluminum Association, only three percent of jobs tied to metal manufacturing in America actually produce aluminum.
Any way you look at it, these tariffs will backfire. An impending trade war affects us all, no doubt about it. With Congress divided on the issue and countries preparing to retaliate, who knows what will happen. Will the trade war be averted or will Americans have to endure an economic trade crisis unprecedented in the country’s history?