The dishonest pretext for Trump's trade war
Trump is pretending his tariffs are necessary for "national security." That's both dumb and dangerous.
President Trump's steel and aluminum tariffs have arrived. On Thursday, Trump announced he'll sign an order next week imposing a 25 percent tariff on all steel imports and a 10 percent tariff on all aluminum imports.
The economic merits of this policy are decidedly mixed. Analysts worry it could make everything from cars to beer more expensive while only boosting the fortunes of a handful of American workers. It could also easily start a trade war if affected countries retaliate.
But one aspect of Trump's controversial decision hasn't gotten nearly the attention it deserves: the justification. Ostensibly, these tariffs are to protect national security.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
That's a transparently dishonest pretext, and it could have major repercussions for what happens next.
Last April, the Commerce Department received orders to investigate whether steel and aluminum imports are a threat to national security under a little-used corner of trade law called Section 232 of the Trade Expansion Act of 1962. The idea is that, should the U.S. get into a real war — i.e. one with planes and tanks, not trade representatives and customs duties — it will need reliable ways to secure resources like aluminum and steel. Since cheap imports can erode and eventually destroy domestic industries, tariffs may be needed to ensure those industries survive.
The Commerce Department returned in January with a report recommending that tariffs be imposed, and offered a range of possible options. Despite some vehement divisions over the policy among his own advisors, Trump reportedly settled on the most aggressive.
Now, American steel mills and aluminum smelters do operate below full capacity — at 72 percent and 39 percent, respectively, in 2017. Nonetheless, the industries are actually faring pretty well. Jobs in aluminum increased between 2013 and 2016, and major steel producers have chalked up solid revenues and profit margins. Meanwhile, U.S. defense purchases account for just 3 percent of domestic steel production, and 20 percent of domestic high-purity aluminum production. Both industries could easily be scaled up should the need arise.
We also import steel and aluminum from a wide range of countries, particularly Canada, South Korea, and Mexico. Of the nations the U.S. might go to war with, none of these suppliers are exactly high on the list. And trusted allies have traditionally counted as reliable sources for supplies in national security situations.
The rules of the World Trade Organization (WTO) — of which America, China, and most every other concerned country are members — discourage these sorts of unilateral trade barriers. There's an exception for national security matters, but it's there on the implicit understanding that countries will use it rarely and judiciously. By contrast, the White House's use of it seems transparently cynical. Administration rhetoric ping-pongs between yes-of-course nods to national security and much more straightforward criticism of unfair trade practices. Whenever he's on a roll, Trump himself tends to forget why he's imposing these tariffs:
This threatens to transform the national security exemption into a loophole big enough to drive a steel-laden semi-truck through. That could destabilize the WTO arrangement, and lead other trade partners to launch their own counterattacks. South Korea is threatening to lodge an official WTO complaint, and eurozone countries are pondering retaliatory tariffs on American exports of everything from orange juice to whiskey and motorcycles.
There's also a much more specific problem where China is concerned.
The Asian behemoth itself uses a pretty expansive definition of national security; one that subsumes economic policies and other arenas. For instance, intellectual property theft is sort of built into Chinese industrial policy, because the government requires foreign companies to join with domestic — and often state-owned — ones to do business in the country. Both the Trump administration and previous White Houses have tried to walk China back from this behavior.
But now Trump is using a similarly expansive and all-consuming definition of national security to back these tariffs. It's a form of reciprocal hypocrisy that will lose the U.S. the moral high ground and sacrifice a fair amount of bargaining leverage over China in the process.
Of course, China really is guilty of dumping steel on global markets and driving down prices. For that reason, America slaps all sorts of restrictions and tariffs on Chinese steel and aluminum already. That's made them a miniscule share of America's imports. But the global price fall means all other imports are cheaper too, corroding America's domestic industry.
That leads to the one potentially sound argument for the tariffs: Since they apply to all countries, they could be a way to prod the international community into getting tougher on China.
Unfortunately, this sort of diplomatic leverage requires a firm and steady commitment to policy and for other countries to believe our promises. Trump's erratic behavior, and the sloppiness and cynicism of these tariffs specifically, undermine all of that.
This is all really a shame.
The elite policy consensus in favor of “free trade” and against protectionism really has become knee-jerk. It deserves to be challenged. One of Trump's few positive aspects is how completely unimpressed he is by that consensus.
Unfortunately, trade is also a genuinely complicated subject that requires careful balances. Any replacement for the elite consensus will need to be nimble, nuanced, and carefully constructed.
Instead, we're getting a hastily constructed policy premised on a transparently dishonest idea. The consequences could be disastrous.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Jeff Spross was the economics and business correspondent at TheWeek.com. He was previously a reporter at ThinkProgress.
-
Why Justin Welby has stepped down as Archbishop of Canterbury
In the Spotlight 'Lack of curiosity' over claims of abuse of dozens of boys by Christian camp leader had made Welby's position untenable
By Arion McNicoll, The Week UK Published
-
Climate change is threatening Florida's Key deer
The Explainer Questions remain as to how much effort should be put into saving the animals
By Justin Klawans, The Week US Published
-
Daniel Lurie: San Francisco's moderate next mayor
In the Spotlight Lurie beat a fellow Democrat, incumbent Mayor London Breed, for the job
By Justin Klawans, The Week US Published
-
The pros and cons of noncompete agreements
The Explainer The FTC wants to ban companies from binding their employees with noncompete agreements. Who would this benefit, and who would it hurt?
By Peter Weber Published
-
What experts are saying about the economy's surprise contraction
The Explainer The sharpest opinions on the debate from around the web
By Brendan Morrow Published
-
The death of cities was greatly exaggerated
The Explainer Why the pandemic predictions about urban flight were wrong
By David Faris Published
-
The housing crisis is here
The Explainer As the pandemic takes its toll, renters face eviction even as buyers are bidding higher
By The Week Staff Published
-
How to be an ally to marginalized coworkers
The Explainer Show up for your colleagues by showing that you see them and their struggles
By Tonya Russell Published
-
What the stock market knows
The Explainer Publicly traded companies are going to wallop small businesses
By Noah Millman Published
-
Can the government save small businesses?
The Explainer Many are fighting for a fair share of the coronavirus rescue package
By The Week Staff Published
-
How the oil crash could turn into a much bigger economic shock
The Explainer This could be a huge problem for the entire economy
By Jeff Spross Published