Arlington, VA March 10, 2018
There are a number of economists and others who consider the efforts of the President to enact tariffs in steel and aluminum imports as significant violations of the current "Free Trade' Environment. The proponents of globalism--led by the liberal left, Obama, and others, such as the Euro Union, are aghast that he would even consider tariffs in any commodity, much less steel and aluminum. A recent article in the Washington Times titled "Donald Trump and Trade" speaks to this in very direct terms. Stephen Moore, the author, says, "The markets rallied as this new plan that targets the tariffs to the countries like China and Russia that are cheating and stealing. It was a reminder that with Mr. Trump it always comes down to the art of the deal." In that, he is right.
Trump shows no reticence in calling lop-sided trade deficits what it is, "Bad for America". Further, these tariffs against our own American goods are not new--they have been in place in the EU for years, and in a number of categories. What The President tries to say is that he wants a level playing field--if another country levies tariffs, or supports product development, then the US has the right to bring equivalent pressure to make the trade paradigm fair and equitable, to the extent it can.
Every country has the right to get the maximum it can from its trading partners--and every trading partner has the right to either decline to trade, or make imports more expensive so that its own domestic production does not suffer. That concept is just as valid an economic perspective as it is for those that say "Throw everything into the market, and let's see what the goods will bear." If that were the case, everyone would be in the same economic plane.
Regrettably, several of the larger industrial nations choose to subsidize their manufacturing, bringing down the costs of manufacture. Others have no unions to contend with, or, as in the case of China and others, have vast populations who are forced to accept artificially low wages to produce goods for export. That leads to the imbalance Trump is trying to correct, with this first step in steel and aluminum.
As the press has indicated, he is also holding out an olive branch--a proposed deal--that would exempt Canada and Mexico, and perhaps China, if the market conditions and value propositions are stabilized. A new NAFTA agreement would go a long way to solving that problem for two of the partners, and, in the case of China, a bilateral agreement on pricing could also work in favor of both countries. Only time will tell if those conditions are met. For others, the message is clear--tariffs are coming to correct major imbalances, and also that Trump is not afraid of either the EU or the PTT partners in that regard. The American exchanges seem to feel he is taking solid steps, and their rise reflect that stance.
