The dice is cast. President Donald Trump fired the shot in a trade war: imposing tariffs of 25% on steel and 10% on aluminum, despite strong opposition and controversies. He justified these tariffs are to protect their own industry, but it seems that “trade war” against many trading partners around the world has begun.
President Trump has kept the position that the US has suffered from aggressive and unfair trade even with its allies. He criticized a number of “very stupid” trade deals that permitted trading partners to capitalize on the US economy. Trump’s announcement prompted strong condemnation from Canada and the EU. The EU warned that it would impose tariffs on a range of US products, such as Levi’s jeans and Harley-Davidson motorcycles. President Trump, however, confronted promptly, saying that in that case he will simply apply additional tariff on European cars. In addition to criticism from various countries, the academics and politicians in the US have expressed their concerns about these hard policies. While the steel industry would benefit from greater job security, the positive impact to the economy is likely to be negligible.
If other countries retaliate against US protectionism, it will result in a severe reduction in world trade, which will hurt the world economy as a whole. Professor Jeffery Sachs also warned that “a few steel companies might benefit a little in the short term, but the United States as a whole, and the world, could suffer enormously from Trump’s reckless ignorance”. History shows that trade wars end up having a negative impact on all protagonists. As a result of the Smoot-Hawley Tariff Act, which imposed a high tariff on imports for the purpose of protecting American farmers and industries during the Great Depression in 1929, the GNP of the US sharply decreased as Canada, France, and the UK took retaliatory actions. The United States and President Trump should remind the historical lessons that protectionism to increase the competitiveness of domestic industries has put the world economy in crisis as a result.
Keunah Choi/ Tax Advisors for Champaign Society