by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Trade protectionism — crony capitalism for well-connected and politically sensitive firms and industries — is bad policy, but it is one of the few issues about which Donald Trump has been consistent in his public statements going back decades, to the 1980s at least. He ran on a protectionist agenda and specifically named steel imports as a source of irritation.
The economics here are pretty straightforward. Trump thinks steel is just one more example of the Chinese getting one over on Americans, but China is in fact a minor player in the U.S. steel-import business, being No. 11 among nations exporting steel to the United States. A quarter of our imported steel comes from our NAFTA partners, mostly from Canada, which provides 16 percent of U.S. steel imports. Among Asian steel exporters, South Korea is our largest trading partner, not China. Moody’s projects that the country that will be most adversely affected by the tariffs is Canada, followed by Bahrain, a country that does not loom particularly large in our economic consciousness, having as it does an annual national economic output about one-fifth of the Ford Motor Company’s. It is better to punish one’s enemies than one’s allies.
And it is no good at all to punish producers and consumers both, which is what tariffs do. Tariffs are a sales tax, in this case on a raw material that is used in everything from buildings to automobiles and industrial machinery — and the latter two are a big part of the U.S. export portfolio, something that ought to occur to a president who obsesses about the balance of trade.