By Bloomberg Editorial Board
DOES anyone, anywhere, support President Donald Trump’s plan to impose tariffs on steel and aluminum imports?
As Bloomberg News recently reported, Trump is considering broad duties of as much as 24% on imported steel and 10% on aluminum, with the aim of protecting national security and pressuring China to reform its trade practices.
This is a terrible way to achieve either ambition. The likely outcome would be to raise prices, hinder growth, jeopardize jobs, burden taxpayers, encourage retaliation, and heedlessly destabilize the system of global trade. Not to be alarmist, but it could even raise the cost of beer.
The idea is so comprehensively misguided that it has induced a rare consensus in Washington. Most of Trump’s Cabinet opposes the idea, as does nearly every mainstream economist. Farm groups call it a “short-sighted mistake.” Manufacturers call it “disastrous.” Trump’s own Economic Report of the President, which he has no doubt read carefully, warns that such barriers could “distort the free allocation of capital.”
Surely steelmakers, at the very least, would be grateful for this added protection? Not so fast: many producers are worried about the inflation, input shortages, and supplier disruptions that could result, just as the industry’s prospects are otherwise improving and a big infrastructure push is on the way. (Tariffs would only raise the cost of that worthy endeavor.)
Nor does the Pentagon think much of the national-security rationale. Total military demand for steel and aluminum amounts to only about 3% of domestic production, meaning that reliance on imports isn’t a notable danger. Imposing broad tariffs, however, could have a “negative impact on our key allies,” as Trump’s defense secretary delicately put it.
China, meanwhile, won’t be much affected by these measures. It’s already subject to more than two dozen antidumping and countervailing duties on basic steel products, and hence provides less than 3% of total US imports. About the only practical effect of broad new tariffs would be to invite retaliation on American exporters.
None of this is unfamiliar; none of it should be controversial. For decades, the US government has tried now and then to protect the steel industry — and those efforts have consistently harmed consumers, undermined manufacturers, inhibited growth and impeded innovation, all without obvious benefits. The most recent such initiative — the so-called safeguards imposed by the George W. Bush administration in 2002 — raised costs and destroyed roughly 200,000 jobs.
There’s a better way. A different trade dispute has caught Trump’s attention — concerning intellectual property, and China’s approach to transfers of corporate technology. On this issue, the administration is reportedly working with allies to jointly pressure China at the World Trade Organization. This is exactly the right approach: orderly, above board, and intended to minimize conflict. Given time, it may well work.
The same cannot be said for the president’s tariffs. If he proceeds with this idea, he’ll be harming the economy, not helping it.