President Donald Trump announced new tariffs on steel and aluminum imports Thursday, following the recent recommendations of his secretary of commerce, Wilbur Ross. Actually, Trump went a bit further, saying he would hit steel with a 25 percent levy, rounded up from the 24 percent Ross had said was necessary to keep the U.S. industry operating at the 80 percent of capacity that central planners in his department deem optimal. For aluminum, the charge will be 10 percent. Prices on everything made from steel and aluminum will go up; jobs saved by producers may be offset by jobs lost elsewhere. If that seems contradictory, consider the fact that this tax increase on raw materials comes from the same president who says the economy is booming because he cut taxes on income.
Ostensibly, these added burdens on all Americans except those involved in steel and aluminum production are necessary for national security. That’s the rationale Ross invoked to escape what would otherwise be American commitments under international trade law. Superficially plausible - planes are made of aluminum; tanks from steel - it’s basically bogus. A real expert on national security, Defense Secretary Jim Mattis, has been decidedly cool on Ross’ protectionist project and said so in a memorandum to the commerce secretary, albeit between the lines. While Mattis said he was against countries “intentionally” using “unfair” trade practices to harm the U.S. defense industrial base - as opposed to outcompeting us, which is what some of the trading partners potentially affected by the Trump tariffs are actually doing - he also pointed out that U.S. industry can easily meet the military’s steel and aluminum needs without protection.
If we must go ahead with tariffs anyway, Mattis urged, we should spare our “key allies” from “negative impact” and encourage them to join us in putting pressure on China, whose market manipulations in both steel and aluminum are real and a legitimate focus for U.S. response. However, the president gave no sign Thursday that he would heed either suggestion. On its face, his decision applies equally to hostile powers such as China and Russia and to close treaty allies such as Canada and Japan. Without major modifications, the president’s plan will encourage U.S. allies to join forces with U.S. adversaries. Mattis also urged making it clear to U.S. industry that protection would be conditional, “to set clear expectations domestically regarding competitiveness.” Instead, Trump promised a roomful of steel and aluminum executives “you’ll have protection for the first time in a long while,” adding vaguely: “You’ll have to regrow your industries, that’s all I’m asking.”
Trump’s words are not always an exact guide to the policies his administration formally adopts. Already, though, the president and his commerce secretary have legitimized unilateral invocation of a “national security” exception to normal trade rules. Other countries can play that game, too; and more might try, now that the United States has set this bad example.
Race to the bottom, trade war: Call it what you will, the spiral will eventually harm everyone, the United States and its metal industries very much included.