Trump's tariffs

While President Trump’s recently-announced tariffs on steel and aluminum might seem like good news for the Iron Range at first glance, a closer look suggests that any short-term gains from the further slowing of foreign steel imports could cause significant problems down the road for domestic steel producers and the taconite mines that provide their raw material.

And when viewed from a slightly broader perspective, such as for Minnesota as a whole, the president’s move is widely expected to cost jobs and slow the economy as trade partners inevitably implement retaliatory tariffs and duties on other Minnesota products, particularly in the agricultural sector.

In the past, U.S. presidents have typically focused trade sanctions on countries that engage in unfair trade. By announcing across-the-board tariffs, Trump has essentially undermined a longstanding talking point in the U.S. steel industry— namely that our domestic steel producers can compete with any other country in the world, if given a level playing field. They’ve accused China, in particular, of unfair trade because that country lacks the same labor and environmental standards with which the U.S. industry must comply.

That’s true, but it also isn’t addressed by Trump’s announced tariffs. Chinese steel exports to the U.S. have fallen by two-thirds since President Obama announced a 500-percent tariff on Chinese steel products back in 2016, in response to a finding that Chinese producers were illegally dumping steel. Trump’s announcement will have no impact on Chinese steel exports to the U.S.

The biggest losers from Trump’s announced tariffs will be Canada and the European Union, particularly Germany, both of which export far more steel to the U.S. than China does in the wake of the Obama tariffs. Yet if Canada and Germany, which maintain higher labor and environmental standards generally than here in the U.S., can export steel to our domestic market and do so more cheaply than our domestic industry, perhaps the problem doesn’t lie with the lack of a level playing field. Maybe other domestic policies, and a lack of needed investment in the U.S. steel industry, are at the root of the problem. And that won’t be fixed by a tariff scheme that is purely protectionist, rather than a response to legitimately unfair trade practices.

In the end, Trump’s tariffs won’t last because they won’t work, not even for the steel industry. The vast majority of steel produced in the U.S. goes into our domestic manufacturing sector, and Trump’s plan will noticeably increase the cost of steel-intensive U.S. products, from cars, to pipe, to large appliances, and that will give foreign producers of these products a further competitive edge in the global marketplace. As sales of American-made products fall, demand for U.S. steel will fall as well.

If Trump responds with tariffs on foreign cars and other manufactured products, which he has already threatened, it could send the global economy spiraling into a harmful trade war with wide scale economic repercussions— none of which would help the U.S. steel industry. It’s for reasons like this that President George W. Bush quickly dropped similar tariffs that his administration had implemented back in 2002 to protect the U.S. steel industry. They found the tariffs did more harm than good.

When Trump tweets that trade wars are “easy to win,” he clearly has no idea what he’s talking about. Trade wars create major economic dislocations and damage to all involved. Whatever short-term benefit might accrue to the Iron Range as a result of Trump’s latest move, could well be overshadowed by the long-term harm.

It’s understandable that workers in the U.S. feel threatened by the system of world trade as it exists today, and may celebrate any move that causes disruption in a model that currently rewards those at the top and leaves the rest of us behind. The solution, however, is to adjust our political policies to ensure that the benefits of the current economic system are more widely shared. Simply blowing up the economic system, as Trump now threatens to do, will leave few, if any, winners behind.