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Tariffs in the first Trump administration

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Main article: Economic policy of Donald Trump

The Trump tariffs are a series of tariffs imposed during the presidency of Donald Trump. In January 2018, Trump imposed tariffs on solar panels and washing machines,[1] and in March 2018, Trump imposed tariffs on steel and aluminum.[2]

Among elected officials, reactions often varied among regional lines rather than ideological lines.[3] The tariffs have seen widespread criticism from conservatives and Republicans, but got generally positive reception from labor union leaders.[3][4][5][6] Reception was mixed among Democratic officials,[7] with Democrats from Rust Belt states voicing support for tariffs on steel and aluminum imports.[8]

Morgan Stanley estimated that Trump's tariffs on steel, aluminum, washing machines, and solar panels, as of March 2018, covered 4.1 percent of U.S. imports.[9] The tariffs measures were poorly received by the vast majority of economists; almost 80% of 104 economists surveyed by Reuters believed that imports on tariffs on steel and aluminum imports would be a net harm to the U.S. economy, with the rest believing that the tariffs would have little or no effect; none of the economists surveyed believed that the tariffs would benefit the U.S. economy.[10]

Forty-five U.S. trade associations are urging Trump not to impose tariffs on China, warning it would be “particularly harmful” to the U.S. economy and consumers.[11]

Background

See also: Tariffs in United States history and Protectionism in the United States
Average Tariff Rates in US (1821–2016)
U.S. Trade Balance and Trade Policies (1895–2015)
Average Tariff Rates on manufactured products

During the 2016 presidential campaign, Trump repeatedly favored policy proposals that re-negotiate trade deals for the United States. During a meeting with the New York Times Editorial Board, Trump said that he would tax Chinese imports into the United States by 45%. [12]

On November 21 2016, in a video message, Trump introduced an economic strategy of "putting America first", stating that he would negotiate "fair, bilateral trade deals that bring jobs and industry back onto American shores." On January 23, 2017, three days after becoming president, Trump withdrew the United States from the politically divisive Trans-Pacific Partnership believing that the agreement would "undermine" the U.S. economy and their independence.[13][14][15][16]

Trump has also indicated desire to end the North American Free Trade Agreement with Canada and Mexico. His administration has been in the process of renegotiating the terms of the agreement. Although vague on the exact terms he seeks in a renegotiated NAFTA, Trump threatened to withdraw from it if negotiations fail.[17] He has specifically criticized the Ford Motor Co.,[18] Carrier Corporation,[18] and Mondelez International for having operations based in Mexico.[18][19][20] In August 2015, in response to Oreo maker Mondelez International's announcement that it would move manufacturing to Mexico, Trump said that he would boycott Oreos.[20]

Similar to his approach to trade deals, Trump also pledged, as part of the Contract with the American Voter, to impose tariffs to discourage companies from laying off workers or relocating to other countries, through an "End the Offshoring Act."[21] No such act has been introduced in Congress, but Trump has moved to impose tariffs on solar panels, washing machines, steel, and aluminum. The enforcement of the tariffs falls primarily within the purview of Department of Commerce and Office of the United States Trade Representative.

Analysis

John Cassidy of the New Yorker writes that Trump seeks to make the Republican Party "into a more populist, nativist, avowedly protectionist, and semi-isolationist party that is skeptical of immigration, free trade, and military interventionism."[22] Trump is a protectionist, according to free-market advocate Stephen Moore and conservative economist Lawrence Kudlow.[23]

His anti-globalization policies of trade protectionism often cross party lines.[24] For example, U.S. Senator Bernie Sanders applauded the withdrawal from the Trans-Pacific Partnership, saying "For the last 30 years, we have had a series of trade deals[...] which have cost us millions of decent-paying jobs and caused a ‘race to the bottom’ which has lowered wages for American workers."[25]

According to economic experts canvassed by PolitiFact, the tariffs could help create new manufacturing jobs and lead to some concessions from the U.S.'s foreign trading partners, but consumer costs and production costs would almost certainly rise, the stock market would fall, interest rates could rise, and trade wars could occur.[26] PolitiFact noted that lower-income consumers in the United States would be hurt the most.[26]

Steel and aluminum

On March 1, 2018 Trump announced his intention to enforce a 25 percent tariff on steel and a 10 percent tariff on aluminum imports.[27] In a tweet issued the next day, Trump asserted that "Trade wars are good, and easy to win."[28] On March 8, he signed an order to impose the tariffs effective after 15 days.[2] Canada and Mexico are exempt from the order under a carve-out provision.[2] An administration official later said that the exemptions for Canada and Mexico were not permanent, but depend on their renegotiating NAFTA to Trump's liking.[29] Trump and his aides said that extending exemptions to other countries was possible,[30][2] with Trump specifically citing Australia as a possibility.[2]

The legal basis cited in Trump's tariff order is Section 232 of the Trade Expansion Act of 1962 which under certain circumstances allows the president to impose tariffs based on the recommendation from the U.S. Secretary of Commerce if "an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the national security."[31] This section is rarely used,[31] and has never been invoked since the creation of the World Trade Organization was established in 1995.[32]

Economic and trade analysis

A survey of leading economists by the Initiative on Global Markets at the University of Chicago Booth School of Business showed a consensus that imposing new US tariffs on steel and aluminum will not improve Americans’ welfare.[33] Economists say that the tariffs will lead to more harm than gains, as the price for steel increases, which will harm consumers and Americans working in manufacturing industries that use steel (these jobs outnumber those who work in steel-producing sectors by 80 to 1).[34][35][36] The big winners of the tariffs are some American steel- and aluminum-producing industries; some of the producers (especially small- and middle-sized ones) who are reliant on foreign inputs may struggle as a result of the tariffs.[36][37][38] A study of the proposal indicated that it would lead to an estimated loss of 146,000 jobs.[39] Studies of the 2002 steel tariffs enacted by the Bush administration show that they caused more job losses than job gains.[34] Jobs losses could be even greater if other countries retaliate against the United States with their own tariffs on various American products.[40]

Scholars warned that the Trump administration's use of "national security" rationales[41] (these have not been commonly used by past administrations) for the tariffs could undermine the international trading order, as other states could use the same rationales for their own tariffs.[34][42][36] The WTO allows states to take actions necessary to ensure their national security, but this provision has been sparsely used, given that it could be abused.[43] Whereas national security reasons were cited for the tariffs, it has been noted that tariffs primarily harm American allies, not enemies; the United States imports very little steel and aluminum from China directly.[29]

Response

The Dow Jones Industrial Average tumbled more than 500 points, or 2%, after the initial announcement. Large steel consumers, like U.S. car manufacturers, Ford and General Motors saw even larger drops in share price.[44] U.S. metal manufacturers like AK Steel Holding, U.S. Steel, and Nucor saw sizable gains.[45] U. S. Steel said it would reopen a plant in Illinois.[30]

China, Canada, and the European Union responded negatively to the initial announcement (which did not mention the exemptions for Canada and Mexico). Canada supplies sixteen percent of U.S. demand for steel, followed by Brazil at thirteen percent, South Korea at ten percent,[46] Mexico at nine percent, versus China’s two percent.[44] From 2013 to 2016, Canada was the largest source of aluminum imports to the U.S.[47] China threatened to curb imports of U.S. soybeans.[45] Canadian Trade Minister, Francois-Phillippe Champagne, said the tariffs would be "unacceptable."[48] Jean-Claude Juncker, the president of the European Commission, stated such an action by the U.S. would face a legal challenge at the World Trade Organization.[49]

The AFL-CIO, the largest labor union in the U.S., praised Trump for the tariffs, as did Democratic Ohio Senator Sherrod Brown, who said that the action would be a boon for "steel plants across Ohio." Many congressional Republicans expressed fear that the tariffs might damage the economy or lead to retaliatory tariffs from other countries. Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell urged Trump to rethink his proposal or to target the tariffs more narrowly so as to avoid "unintended consequences and collateral damage."[50] The proposal drew comparisons to a tariff imposed by his Republican presidential predecessor, George W. Bush;[44] in 2002 the U.S. enforced heavy steel tariffs that were largely seen as ineffectual or even harmful to the U.S., and were withdrawn after 18 months.[51]

On March 6, 2018, Gary Cohn, chair of the National Economic Council, announced his intention to resign; the announcement followed Trump's cancellation of a meeting with end-users of steel and aluminum that Cohn had arranged in an attempt to dissuade the president from the planned tariffs.[52]

A March 2018 Quinnipiac University poll showed widespread disapproval of the tariffs, with only 29 percent of Americans agreeing with a "25% tariff on steel imports and a 10% tariff on aluminum imports" if it raised their cost of living.[53]

Solar panels

On January 23, 2018, Trump imposed tariffs on solar panels produced outside the United States. The tariffs initially start at thirty percent and will gradually fall to fifteen in four years.[54][55]

Tariffs on Solar Panels[56]
Components Year 1 Year 2 Year 3 Year 4
Safeguard Tariff on Modules and Cells 30% 25% 20% 15%
Cells Exempted from Tariff 2.5 gigawatts 2.5 gigawatts 2.5 gigawatts 2.5 gigawatts

China is currently the world leader in solar panel manufacture, and the Chinese nation has decried the tariffs.[57] Zhong Shan, the Chinese Ministry of Commerce said in a statement, “With regard to the wrong measures taken by the United States, China will work with other W.T.O. members to resolutely defend our legitimate interests.[58]

Environmentalists and animal rights advocates have expressed concern that the new tariffs will hurt the growth of sustainable energy and the species which are on the endangered list due to climate change.[59]

Washing machines

On January 23, 2018, in conjunction with the tariffs placed on solar panels, Office of the U.S. Trade Representative announced tariffs on washing machines.[56] According to the U.S. International Trade Commission (ITC), imports of large residential washers increased “steadily” from 2012 to 2016, and that domestic producers’ financial performance “declined precipitously.”[60] In the first year, the tariffs start at twenty percent for the first 1.2 million units of imported finished washers, and all subsequent washers within that year will have a fifty percent tariff. By the third year initial tariff will go down to sixteen and forty percent, following the same pattern.

The tariffs came after a petition was filed by Whirlpool, a U.S.-based washing machine manufacturer facing tough competition from LG Electronics and Samsung both based in South Korea.[61]

Tariffs on Washing Machines[56]
Components Year 1 Year 2 Year 3
First 1.2 million units of imported finished washers 20% 18% 16%
All subsequent imports of finished washers 50% 45% 40%
Tariff on covered parts 50% 45% 40%
Covered parts excluded from tariff 50,000 units 70,000 units 90,000 units

China exported $425 million worth of washers to the United States in 2016, followed by Mexico's $240 million, and South Korean companies $130 million.[60] Samsung and LG are among the top exporters of washers to the United States. Two weeks prior to the announcement of the tariffs, Samsung moved its production of washing machines to a new plant in South Carolina. In response Samsung said U.S. consumers will "pay more, with fewer choices." Mexican officials said they would respond to the tariffs during the ongoing NAFTA renegotiations.[62]

Proposed tariffs

Automobiles

During the campaign Trump said he would impose tariffs — in the range of 15 to 35 percent — on companies that move their operations to Mexico.[19] Trump has pledged a 35 percent tariff on "every car, every truck and every part manufactured in Ford's Mexico plant that comes across the border."[63] Tariffs at that level would be far higher than the international norms (which are around 2.67 percent for the U.S. and most other advanced economies and under 10 percent for most developing countries).[64]

After the European Union threatened to impose retaliatory tariffs should a tariff on steel and aluminum be imposed, on March 3, 2018 Trump countered with a threat to tariff European car manufacturers.[65]

See also

References

  1. ^ Richard Gonzales, Trump Slaps Tariffs On Imported Solar Panels And Washing Machines, NPR (January 22, 2018).
  2. ^ a b c d e Scott Horsley, Trump Formally Orders Tariffs on Steel, Aluminum Imports, All Things Considered (March 8, 2018).
  3. ^ a b "Trump's steel tariffs are earning him cheers from Democrats and unions". Associated Press.
  4. ^ Haley Britzky (March 1, 2018). "The response to Trump's tariffs, from Congress, businesses, and abroad". Axios.
  5. ^ Berman, Russell (March 6, 2018). "Republicans can't stop Trump's left-wing drift on trade". The Atlantic.
  6. ^ Williams, Joe. "Republican Reaction To Trade Taxes: Fast, Furious, Negative". Roll Call. {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  7. ^ Amie Parnes & Jordain Carney (March 9, 2018). "Dems tread cautiously on Trump's tariffs". The Hill.
  8. ^ Susan Cornwell (March 2, 2018). "Rust-belt Democrats praise Trump's threatened metals tariffs". Reuters.
  9. ^ David Chance (March 5, 2018). "Trump's trade tariffs: Long on rhetoric, short on impact?". Reuters.
  10. ^ Shrutee Sarkar (March 13, 2018). "Economists united: Trump tariffs won't help the economy". Reuters.
  11. ^ af.reuters.com 18 March 2018
  12. ^ "Donald Trump Says He Favors Big Tariffs on Chinese Exports". The New York Times. Retrieved March 20, 2018.
  13. ^ "Donald Trump vows to cancel Trans-Pacific Partnership as president, puts NAFTA on notice". The Washington Times. Retrieved November 15, 2016.
  14. ^ "TPP's Death Won't Help the American Middle Class". The Atlantic. Retrieved January 22, 2017.
  15. ^ "Presidential Memorandum Regarding Withdrawal of the United States from the Trans-Pacific Partnership Negotiations and Agreement". The White House. Retrieved March 2, 2018.
  16. ^ "Trump executive order pulls out of TPP trade deal". BBC News. Retrieved January 23, 2017. Mr Trump's executive order on TPP is seen as mainly symbolic since the deal was never ratified by a divided US Congress.
  17. ^ "What Is Nafta, and How Might Trump Change It?". The New York Times. Retrieved April 5, 2017.
  18. ^ a b c Appelbaum, Binyamin (March 10, 2016). "On Trade, Donald Trump Breaks With 200 Years of Economic Orthodoxy". The New York Times. ISSN 0362-4331. Retrieved March 2, 2018.
  19. ^ a b Needham, Vicki (July 24, 2016). "Trump suggests leaving WTO over import tax proposal". Retrieved July 24, 2016.
  20. ^ a b Michael Daly (August 8, 2015). "Donald Trump Won't Eat Oreos Because They're Too Mexican Now". Daily Beast. Retrieved April 9, 2016.
  21. ^ "Donald Trump's Contract with the American Voter" (PDF). donaldjtrump.com.
  22. ^ John Cassidy, Donald Trump Is Transforming the G.O.P. into a Populist, Nativist Party, New Yorker (February 29, 2016).
  23. ^ Kudlow, Lawrence; Moore, Stephen (August 26, 2015). "Donald Trump: A 21st Century Protectionist Herbert Hoover". Real Clear Politics. Retrieved March 5, 2016.
  24. ^ Amber Phillips (August 8, 2016). "A shortlist of economic issues on which Donald Trump sounds more like a Democrat than a Republican". Washington Post.
  25. ^ "Reaction to Trump's withdrawal from TPP doesn't fit cleanly along party lines". Business Insider. Retrieved October 31, 2017.
  26. ^ a b "Donald Trump floated big tariffs. What could the impact be?". Retrieved July 3, 2016.
  27. ^ "Trump declares his trade war: targets steel, aluminum". Axios. Retrieved March 1, 2018.
  28. ^ Damian Paletta, Trump insists ‘trade wars are good, and easy to win’ after vowing new tariffs, Washington Post (March 2, 2018).
  29. ^ a b "What We Do and Don't Know After Trump's Tariff Announcement". Harvard Business Review. March 9, 2018. Retrieved March 9, 2018.
  30. ^ a b Cox, Jeff (March 8, 2018). "Trump signs steel and aluminum tariffs that exempt Canada and Mexico and leave door open to other countries". CNBC. Retrieved March 9, 2018.
  31. ^ a b Shannon Togawa Mercer & Matthew Kahn, America Trades Down: The Legal Consequences of President Trump's Tariffs, Lawfare (March 13, 2018).
  32. ^ Tom Miles, Trump's extraordinary tariffs, Reuters (March 5, 2018).
  33. ^ "Steel and Aluminum Tariffs". www.igmchicago.org. Retrieved March 12, 2018. {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  34. ^ a b c "President Donald Trump wants tariffs on steel and aluminium". The Economist. Retrieved March 9, 2018.
  35. ^ "Will Steel Tariffs Put U.S. Jobs at Risk? | Econofact". Econofact. February 26, 2018. Retrieved March 9, 2018. ...because steel is an input into so many other products, the measures more likely will trade off jobs saved in steel industry against job losses in other manufacturing industries. The losses could be substantial because the number of jobs in U.S. industries that use steel or inputs made of steel outnumber the number of jobs involved in the production of steel by roughly 80 to 1. {{cite news}}: Cite has empty unknown parameter: |dead-url= (help)
  36. ^ a b c "The Real Risks of Trump's Steel and Aluminum Tariffs". The New York Times. March 1, 2018. ISSN 0362-4331. Retrieved March 9, 2018.
  37. ^ Kitroeff, Natalie; Swanson, Ana (March 3, 2018). "Trump's Tariff Plan Leaves Blue-Collar Winners and Losers". The New York Times. ISSN 0362-4331. Retrieved March 9, 2018.
  38. ^ "Struggling US steel mills fear hammer blow to jobs". Financial Times. Retrieved March 9, 2018. {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  39. ^ Timmons, Heather (March 5, 2018). "Five US jobs will be lost for every new one created by Trump's steel tariffs". Quartz (publication). Retrieved March 7, 2018. {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  40. ^ Lynch, David J.; Dewey, Caitlin (March 2, 2018). "Trump finally gets his tariffs — and much of the world recoils". Washington Post. ISSN 0190-8286. Retrieved March 9, 2018.
  41. ^ the rationales are named in Trump's Presidential proclamation (www.whitehouse.gov)
  42. ^ Bown, Chad P. (March 1, 2018). "Analysis | Trump has announced massive aluminum and steel tariffs. Here are 5 things you need to know". Washington Post. ISSN 0190-8286. Retrieved March 9, 2018.
  43. ^ "Donald Trump, Steel Tariffs, and the Costs of Chaos". Council on Foreign Relations. Retrieved March 9, 2018.
  44. ^ a b c Schlesinger, Jacob M.; Nicholas, Peter; Radnofsky, Louise (March 2, 2018). "Trump to Impose Steep Aluminum and Steel Tariffs". Wall Street Journal. ISSN 0099-9660. Retrieved March 3, 2018.
  45. ^ a b "Trump to impose steep tariffs on steel, aluminum; stokes trade war..." Reuters. March 2, 2018. Retrieved March 2, 2018.
  46. ^ see also Economy of South Korea#Trade statistics
  47. ^ Wang, Christine (March 1, 2018). "Canada, European Union pledge countermeasures against US steel, aluminum tariffs". CNBC. Retrieved March 2, 2018.
  48. ^ "Trump Expected to Announce Stiff Steel, Aluminum Tariffs". Bloomberg.com. March 1, 2018. Retrieved March 2, 2018.
  49. ^ "European Commission responds to the US restrictions on steel and aluminium affecting the EU" (Press release). European Commission. March 1, 2018.
  50. ^ Decker, Cathleen (March 6, 2018). "Republican congressional leaders push Trump to cancel or narrow his tariff plan, but president appears unmoved". Los Angeles Times. Retrieved March 8, 2018.
  51. ^ Palmer, Doug (March 7, 2018). "Why steel tariffs failed when Bush was president". Politico. Retrieved March 8, 2018.
  52. ^ Mangan, Dan; Pramuk, Jacob (March 6, 2018). "Gary Cohn resigns as Trump's top economic advisor". CNBC. Retrieved March 6, 2018.
  53. ^ "U.S. Voters Oppose Steel, Aluminum Tariffs". Quinnipiac University Polling Institute. March 7, 2018. Retrieved March 7, 2018. {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  54. ^ "President Trump Slaps Tariffs on Solar Panels in Major Blow to Renewable Energy". Time Magazine. January 23, 2018. Retrieved January 23, 2018.
  55. ^ "Trump's solar tariffs could put the brakes on rapid job growth in renewable energy". CNBC. January 23, 2018. Retrieved January 23, 2018.
  56. ^ a b c "President Trump Approves Relief for U.S. Washing Machine and Solar Cell Manufacturers" (Press release). Office of the United States Trade Representative. January 2018.
  57. ^ "China blasts Trump's new trade tariffs". CNNMoney. January 23, 2018. Retrieved January 23, 2018.
  58. ^ Swanson, Ana; Plumer, Brad (2018). "Trump Slaps Steep Tariffs on Foreign Washing Machines and Solar Products". The New York Times. ISSN 0362-4331. Retrieved March 2, 2018.
  59. ^ "TRUMP TARIFFS WILL FURTHER ENDANGER SPECIES ON THE CLIMATE CHANGE HIT LIST". AnimalRightsChannel.com. January 23, 2018. Retrieved January 23, 2018.
  60. ^ a b "Large Residential Washers: Investigation No. TA-201-076" (PDF). usitc.gov. Retrieved March 2, 2018.
  61. ^ Kline, Daniel B. "Trump Tariffs: Is Now the Time to Buy a Washing Machine?". The Motley Fool. Retrieved March 2, 2018.
  62. ^ Gillespie, Patrick. "Washing machines are going to get more expensive". CNNMoney. Retrieved March 2, 2018.
  63. ^ Lane, Charles (October 21, 2015). "Donald Trump's contempt for the free market". Washington Post. ISSN 0190-8286. Retrieved March 2, 2018.
  64. ^ Rosenfeld, Everett (March 10, 2016). "Trump trade plan is dangerous: Economists". CNBC. Retrieved March 2, 2018.
  65. ^ Trump, Donald J. (March 3, 2018). "If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!". @realDonaldTrump. Retrieved March 3, 2018.
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