Gary Cohn recently departed from the Trump administration in protest of their protectionism and diminishing stance on free trade for steel and aluminum – a policy that most of Trump’s advisors heavily advised against.
Trump recently claimed that trade wars are easy to win. He’s somewhat correct with this assertion because there are definite winners and losers in trade wars. However, the winners aren’t an entire country and the losers aren’t entirely other countries. It’s possibly good for Pittsburgh, but most certainly bad for Detroit.
Since last month the United States Steel Corporation’s stock is up 25%. They are one of the ones that get to profit off of the new protectionist tariffs. The losers would be anyone that must purchase vehicles (cars, trains, boats, and airplanes), appliances, cans, utensils, medical equipment, construction equipment and the things they produce, agricultural equipment and their produce, infrastructure, and military equipment.
There are complexities to navigate with the integration of the North American steel market. Ocean Steel, for example, has 20 locations across New England and Atlantic Canada – it’s a Canadian company with U.S. steel plants. Magna International has steel for automotive manufacturing crossing the Detroit border multiple times before the manufacturing process is complete.
There’s a further remarkable folly. In 2017, the U.S. exported fourteen million metric tons of steel and has trade surpluses with many countries, Canada included. A sweeping tariff would cause a trade war that it only has the capacity to lose with certain nations.
Conspiracy theories surrounding free trade are plentiful – it hasn’t arisen out of a globalist agenda to usurp American sovereignty, it came about due to consumers and producers wanting cheaper or more reliable goods and services. Someone in Toronto will find it easier to buy potatoes from Ohio than Prince Edward Island. Someone in Oregon will find it easier to buy coal from British Columbia rather than New England.
If some well-meaning prime minister or president wishes to protect the Prince Edward Island potato farmer or the New England coal plant worker, they wind up costing consumers money, and incidentally, jobs as well. The Ohio potato farmer will suffer, as will the Canadian coal plant worker; with less money in their pocket, consumers spend less, and with less demand, employers start downsizing.
All of this is further substantiated by empirical data. CITAC had a study that determined the last time steel tariffs were enacted, in 2002, over 200,000 jobs were lost as a result and $4 billion was lost in wages. It was a reckless and ill-conceived policy that President Bush reversed after a year of its devastation.
Jobs are at risk. Losers of these proposed tariffs also include manufacturers, many of whom use steel.
Protectionism is a terrible economic plan. It causes the poorer to become poorer and enriches very few. The policy is supported by Trump’s energetic base and no sound economic reasoning. America will suffer, the world will suffer and very few will be better off. Protectionism is a tried and failed policy that desperately needs to be rejected.
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