The Real Reason for Trump’s Steel and Aluminum Tariffs

Mar 15, 2018 Martin Feldstein

The Trump administration's proposed tariffs on steel and aluminum imports will target China, but not the way most observers believe. For the US, the most important bilateral trade issue has nothing to do with the Chinese authorities' failure to reduce excess steel capacity, as promised, and stop subsidizing exports.

CAMBRIDGE – Like almost all economists and most policy analysts, I prefer low trade tariffs or no tariffs at all. How, then, can US President Donald Trump’s decision to impose substantial tariffs on imports of steel and aluminum be justified?

Trump no doubt sees potential political gains in steel- and aluminum-producing districts and in increasing the pressure on Canada and Mexico as his administration renegotiates the North American Free Trade Agreement. The European Union has announced plans to retaliate against US exports, but in the end the EU may negotiate – and agree to reduce current tariffs on US products that exceed US tariffs on European products.

But the real target of the steel and aluminum tariffs is China. The Chinese government has promised for years to reduce excess steel capacity, thereby cutting the surplus output that is sold to the United States at subsidized prices. Chinese policymakers have postponed doing so as a result of domestic pressure to protect China’s own steel and aluminum jobs. The US tariffs will balance those domestic pressures and increase the likelihood that China will accelerate the reduction in subsidized excess capacity.

Because the tariffs are being levied under a provision of US trade law that applies to national security, rather than dumping or import surges, it will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China...

more at https://www.project-syndicate.org/co...dstein-2018-03

fwiw, U.S. domestic steel price has seen much of a change because of the tariffs, but Chinese commodities are in chaos.

 

It can't. The blubbering over China makes no sense, given its position in the import league. The bit on 'the EU may negotiate' because of the imposition of tariffs was cobblers, particularly as it tried to shoot past the reality of retaliation plans ( http://money.cnn.com/2018/03/16/news/economy/eu-us-tariffs-trade-war/index.html )

 

Trump is not a protectionist according to common sense and Peter Navarro. Its all about making to deal to make America great again ie making it as easy to sell in China for us and it is for China to sell in USA

 

Protectionism for nationalism? Yep, economic irrationality run amok

 

??? what does that mean?? What point are you trying to make??? IF you know why not tell us???

 

Chortle, chortle! Tariffs are irrational except in two very particular circumstances: infant industry development & optimal tariff analysis (where terms of trade are manipulated, assuming that retaliation is somehow impossible). To base tariffs on nationalism, itself a cultural flaw that is used to justify irrational policies, is cretinous.

 

how would you suggest Trump make America great again? if not by getting fair deals with China that help our workers and industries.

 

it's protection to make America great again ie to get fair trade deals. Do you understand?

 

Tariffs for fair trade? Drivel! Pandering to nationalism is merely introducing anti-trade policies. Right wingers should be ashamed of themselves. They can't even pretend to be pro-business

 

The Soviet Union should simply put tarrifs on Reagan, for his cold war quick build, and they would have WON. You win, by FIGHTING, competing.

 

Yes,tariffs to open discussion about fair trade deals. Do you understand now??

 

Chortle, chortle! You do realise retaliation plans are in full swing don't you?

 

I'm not sure China has much room for retaliation. Chinese consumers are demanding more and better quality food. Tariffs on ag imports would increace prices, consumers won't like that. Workers will not like being out of work do to lack of raw materials.

300 million Chinese people have become very dependant on a middle class lifestyle.

 

Those plans are from the EU. However, the idea that China has no retaliation potential is foolhardy. It is, after all, the new economic super power

 

they have some but as Trump says, we have a huge deficit so they will suffer most from a trade war.

 

you mean 800 million!!

 

You don't seem to understand how trade works. No one wins from trade wars. They have immense bargaining power because of the importance of their market.

 

Looking at the numbers, the US market is much more important to China than China's market is to the US.

Looking at it from another perspective, would lower sales at Wal-Mart be more disruptive to the US than more expensive food in China?

I also think trade wars are a bad idea.

 

But that's not how trade works. Mercentalism as an understanding of outcome is, thankfully, long gone. What is amusing, mind you, is that they've chosen industries where China isn't the biggest victim.

China is playing the long game. See, for example, its involvement in Africa. The US isn't. Its playing electoral cycles and pandering to nationalist idiots. That's the real shame

 

Strong-arming China got them to cut tariffs on U.S. imports last year but they've still got a long way to go.

Thing is that Americans are better off even if the U.S. just cuts tariffs unilaterally --even w/o reciprocity --and a good argument can be made to show that this has too often been the case. My take is that Trump thinks Americans will be even better off if both the U.S and our trading partners cut tariffs too, and this can be worth all the fuss.

He could actually pull this off..

 

Coud you give evidence here?

You're not making sense.

 

America's a lot better off that this has been true w/ our trade policy, but China's government is still having a hard time shaking off it's bad habit of distorting markets w/ state control.

Trump seems to be a smart cookie, knowing that we get more out of life by turning liabilities into assets. The leftist press has convinced everyone that Trump's a madman. So he's used that to his advantage --and it's been working w/ both N. Korea and China (not to mention lots of others). Yeah, it gives me an acid stomach too but mho is 'so far so good'.

 

Again, naff all economics in your comment.

 

Just google "2017 china cuts tariffs" and you get

China cuts import tariffs on almost 200 consumer goods http://www.bbc.com/news/business-42107311
China cuts import tariffs on food, drugs and apparel
https://www.reuters.com/article/us-...riffs-on-food-drugs-and-apparel-idUSKBN1DO0T3
China cuts import tariffs on some consumer goods
http://www.latimes.com/business/la-fi-china-tariffs-20171124-story.html
China Cuts Import Duties on Consumer Goods - China Briefing News
http://www.china-briefing.com/news/2017/11/29/china-cuts-import-duties-consumer-goods.html
P&G and Nestle Stand to Gain From China's Lower Import Taxes
https://www.bloomberg.com/news/arti...rt-tariffs-on-consumer-products-from-december
China cuts import tariffs from December 1st
https://www.rsa-tax.com/single-post/2017/11/29/China-cuts-import-tariffs-from-December-1st
China to Cut Tariffs in 2017
http://hkmb.hktdc.com/en/1X0A8INV/hktdc-research/China-to-Cut-Tariffs-in-2017
​

--and many pages more.

--or more correctly you can't make sense out of what I said just like I can't make sense out of what you said. We can go step by step --like:

Americans are better off even if the U.S. just cuts tariffs unilaterally --even w/o reciprocity.​

Do you understand that part? If you don't then pse tell me and I can explain in more detail. If you do then how about saving us both some time and pse tell me which part eludes you.

 

This is drivel. We know that China has celebrated the WTO and followed a strategy of reduced tariffs. You pretended that "strong arming" them achieved that. Do you have any evidence?

So far you have made no valid economic comment or referred to any valid economic analysis. Put that right.