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The 4 Biggest Consequences of Trump’s Disastrous Tariff Plan

For starters, the decision could cripple the U.S. economy

The 4 Biggest Consequences of Trump's Disastrous Tariff Plan

Evan Vucci/AP

President’s Trump’s crusade to alienate the United States from the rest of the world continued on Thursday, when Commerce Secretary Wilbur Ross announced the imposition of a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from Canada, Mexico and the European Union. The tariffs were initially announced in March, but temporary exemptions were granted to our allies in the hopes that a mutually beneficial deal could be struck. It couldn’t; the exemptions were lifted and now the U.S. appears to be entering a world of needless economic pain.

International allies, nonpartisan economists, business leaders and others have roundly condemned the decision. So too have Republican lawmakers like Orrin Hatch, Bob Corker, Ben Sasse and even outgoing House Speaker and reluctant Trump critic Paul Ryan. “I disagree with this decision,” Ryan wrote in a statement. “Instead of addressing the real problems in the international trade of these products, today’s action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China. There are better ways to help American workers and consumers. I intend to keep working with the president on those better options.”

The metal tariffs will have a notable impact on American employers and consumers, but even scarier than the tariffs themselves is what they signal could be coming in the future. Trump on Wednesday suggested a 25 percent across-the-board tariff on imported automobiles, and reportedly told French President Emmanuel Macron he wants “maintain his trade policy until no Mercedes models rolled on Fifth Avenue in New York.”

The tariffs imposed Thursday also throw the future of America’s participation in the North Atlantic Free Trade Agreement (NAFTA) into flux. Trump has expressed a desire to tear up the deal since the 2016 campaign, and no progress has been made as to renegotiating it to Trump’s liking. Judging by his similarly unpopular decisions to remove the U.S. from the Paris Accord and the Iran nuclear deal, it’s now a very real possibility that the president withdraws the U.S. from NAFTA if the trade war he just created were to get worse. “The United States has been taken advantage of for many decades on trade,” Trump said Thursday in a statement, referencing NAFTA. “Those days are over. Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United States will agree to a fair deal, or there will be no deal at all.”

Trump wasn’t as wordy when discussing the issue on Twitter.

Here are four consequences of the decision:

1. Stuff will cost more

The most obvious effect of placing tariffs on imported steel and aluminum is that the price of products made with these metals will increase. The White House has acknowledged as much, but claims that the uptick will be negligible. When the tariffs were first announced in March, Wilbur Ross went on CNBC and brandished a can of soup to prove the administration’s point that the tariffs wouldn’t be so bad.

Experts aren’t as optimistic. When the tariffs already placed on Chinese goods and the retaliatory tariffs Canada, Mexico and the EU have announced they will place on American goods are taken into account, the impact will be a little more pronounced than fractions of a cent on soup cans. “Anything that’s manufactured – prices will rise,” Mark Zandi, an independent economist from Moody’s Analytics, told CNBC. Zandi estimates the tariffs will result in a $210 increase in yearly costs for the average family. To put this in perspective, The GOP’s much ballyhooed tax cut the GOP passed last December will save the middle-fifth of American earners $930. This means the tariffs are essentially a tax increase, as Republican Senator Orrin Hatch pointed out on Thursday. “Tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers,” Hatch said.

2. Jobs will be lost

The White House has tried to sell the tariffs as a way to increase American steel and aluminum manufacturing, and thus bring more jobs to those industries. But 50 percent of American steel and aluminum imports came from Canada, Mexico and the EU, and manufactures can’t just snap their fingers to make up what is being lost. Experts estimate that hundreds of thousands of jobs will have to be cut in industries that rely on imported steel and aluminum, outnumbering whatever jobs would be gained manufacturing the metals domestically.

Chief executive of the U.S. Chamber of Commerce Tom Donohue wrote a letter to his board of directors on Thursday outlining the damage Trump’s trade policy could do to the economy. If the president ultimately decides to pull out of NAFTA, Donohue estimates as many as 2.6 million jobs could be lost. “The current approach – and the obvious retaliation that will occur in response – poses a serious risk of raising barriers and reducing Americans’ access to vital global markets,” Donohue wrote according to the Wall Street Journal, which reviewed the memo. “Our businesses will lose customers, workers will lose jobs, and American consumers will lose family income through higher taxes and higher prices.”

3. American exporters will suffer

Canada, Mexico and the EU were none too pleased with the news that the Trump administration decided to lift the tariff exemptions, and they’re not taking it lying down. Canada has already announced it will impose up to $12.8 billion in tariffs on American steel, aluminum, whiskey, orange juice and other products. “This is the strongest trade action Canada has taken in the post-war era,” said Canadian Minister of Foreign Affairs Chrystia Freeland.

The EU is looking to place $3.3 billion in tariffs on American products like jeans, bourbon and Harley-Davidson motorcycles, while Mexico has said it will place tariffs on everything from steel to meats, fruits and cheeses. Just as with China’s recent threat of a soybean tariff, the response from our allies will place a significant burden on American agriculture. “These tariffs will harm U.S. farmers and take many American farm operations to the breaking point,” Brian Kuehl, executive director of Farmers for Free Trade, told The Hill.

Any industry with products victimized by retaliatory tariffs will suffer. “It is especially frustrating to see U.S. pork caught up in a dispute that has nothing whatsoever to do with pork trade,” U.S. Meat Export Federation CEO Dan Halstrom told Bloomberg in reference to the pork tariffs threatened by Mexico. “If these tariffs are implemented, they will negatively impact millions of consumers and thousands of people in the meat and livestock industries on both sides of the border.”

4. America’s relationship with its allies will take another massive hit

Trump’s decision to impose tariffs on its allies is such a breach of protocol that the administration had to do it under the guise of national security, meaning the United States has labeled its closest allies a threat. “It is simply ridiculous to view any trade with Canada as a national security threat to the US and we will continue to stand up for Canadian workers & Canadian businesses,” Canadian Prime Minster Justin Trudeau tweeted on Thursday. Trudeau also said during a news conference that the tariffs mark “a turning point in the Canada-U.S. relationship.”

The Mexican government released a statement noting that the nation “deeply regrets and condemns the decision of the United States … at the discretion of national security.” Jean-Claude Juncker, president of the European Commission, echoed the feelings of Canada and Mexico. “This is protectionism, pure and simple,” he said.

Should Trump decide to impose an additional tariff on automobiles, it could prove catastrophic for America’s relationship with Germany. “I would really see it as the end of the German-American trade relationship,” Evercore ISI analyst Arndt Ellinghorst told The Street in reference to a potential 25 percent tariff on German autos. “Not a single car built in Germany and sold to the U.S. would be sold at a profit.”

It may be hard for the U.S. to even call anyone an ally anymore. As the Washington Post pointed out on Thursday, the United States is now placing more tariffs on Canada, Mexico and the EU than on China.

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