Randall Forsyth writes for Barron’s about the potential harm linked to new tariffs on foreign steel and aluminum.
Beyond the markets’ unsteady situation, the economics of the tariff decision are, at best, curious. Just as taxes were cut and spending was boosted—and as the economic expansion approached its ninth anniversary with the jobless rate at what’s generally considered full employment—the administration is imposing protectionist tariffs on a U.S. manufacturing sector that’s cooking. Last week, the Institute for Supply Management reported that its manufacturing gauge had hit a new high for the cycle in February, 60.8, up from 59.1 in January and far above the 50 mark that denotes expansion.
Trump’s decision “doesn’t rely on any economic argument and instead imposes trade restrictions on national security grounds,” observe Goldman Sachs economists in a research note. But that isn’t what got markets in a dither. “This could lead to other trading partners taking similar actions and could ultimately weaken the international trade conventions, like [World Trade Organization] rules, more generally,” they note.
In other words, a trade war. To which the president tweeted Friday, “trade wars are good” when the U.S. “is losing many billions of dollars with virtually every country it does business with.” If the U.S. has a deficit of $100 billion with a certain country, “don’t trade anymore—we win big. It’s easy!” …
… That said, to use the highly technical jargon of John Ryding and Conrad DeQuadros of RDQ Economics, the tariffs “are a really dumb idea.”
“The users of steel will be disadvantaged by the rise in the price of steel and potential retaliation,” they continue. Payrolls of steel and aluminum producers totaled 203,000 in January, compared with an estimated 6.5 million in industries that use steel, such as automobile production and construction.
