President Donald Trump is following through on a populistic promise. Administration tariffs on foreign steel and aluminum are expected to finally face a real-life road test.
For the moment, predictions of costly gloom from some economic worthies — even some within Trump’s inner circle — are offset by positive excitement elsewhere.
Obviously producers such as Nucor and U.S. Steel Corp. expect to benefit, having lobbied hard for help against undercutting from the likes of Russia, South Korea and China.
Prices on the domestic product should spike and are already reported to be rising in anticipation. More sales are expected to mean more blue-collar jobs in the sector.
“This welcome action is long overdue for shuttered steel plants across Ohio and steelworkers who live in fear that their jobs will be the next victims of Chinese cheating,” said Sen. Sherrod Brown (D-Ohio).
“If we fail to stand up for steel jobs today, China will come after other jobs up and down the supply chain tomorrow.”
The counter-argument has been that making imported metals more expensive will drive up consumer costs.
Toyota promptly announced last week that the move will “substantially raise costs and therefore prices of cars and trucks sold in America.”
Arguments over tariffs range wide.
Some players like to hark back to the negative impact of the 1930 Smoot-Hawley tariff law — just as some war hawks relate any negotiation with a hostile power to British Prime Minister Neville Chamberlain’s attempt to appease Nazi Germany.
Smoot-Hawley exacerbated the Great Depression. Other nations imposed stiff tariffs in return, hurting U.S. exports.
But during the presidential campaign in 2016, Trump’s trade adviser Peter Navarro was asked by CNN if the GOP candidate’s proposed barriers wouldn’t repeat that.
“There are no similarities at all,” Navarro was then quoted as saying. Smoot-Hawley was a “protectionist” move, but Trump’s tariffs would be “defensive” because trade has been tilted against the United States for decades.
Some who disagree with Trump on the issue point to President Barack Obama’s 2009 tariffs on Chinese companies to protect American companies. Critics argue that while tire-plant jobs were shielded, a loss of retail jobs followed as the cost of the imports rose, cutting sales to consumers.
Fear of an international “trade war” was blamed for suppressing stock market prices late last week.
But Trump argued in one of his Twitter pronouncements:
“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.
“Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”
That, of course, will depend on how effectively other nations may retaliate. It looks like we are destined to find out.