Tariffs and trade wars - What's Your Point?

- This week's panel:   Bob Price – Associate Editor Breitbart Texas, Nyanza Moore - progressive commentator and Houston attorney, Tony Diaz- Chicano educator and activist,  Bill King - businessman, columnist and former Kemah Mayor, and Jessica Colon - Republican strategist, join Greg Groogan to discuss Trump's latest comments regarding tariffs and trade wars

WASHINGTON (AP) - President Donald Trump's move to impose tariffs on imported steel is meant to protect an industry that employs about 140,000 Americans. Yet by raising the price of steel, those same tariffs stand to hurt a far larger group of U.S. workers: the 6.5 million who work in industries that buy steel - from automakers to aircraft manufacturers to suppliers of building materials.

Trump has vowed to impose 25 percent tariffs next week on imported steel and 10 percent on aluminum, which he says pose a threat to America's national security. By building barriers to imported metal, the tariffs would allow U.S. steel companies to expand production and charge higher prices than they could without broader competition. Those higher prices, in turn, would squeeze the companies that use the materials and potentially the consumers who buy the finished goods.

Some economists warn that if consumers must pay more for cars or businesses more for heavy equipment, the resulting slowdown in spending could hamper the economy.

"Higher prices for consumers could eventually lead to slower U.S. economic growth and result in reduced (overall) factory employment," Moody's Investors Service cautioned in a report.

The tariffs and the prospect they will ignite a conflict with America's trading partners has rattled Wall Street: The Dow Jones industrial average plunged 420 points on Thursday and an additional 71 points Friday.

Commerce Secretary Wilbur Ross went on CNBC to dismiss as overblown any fears that steel-consuming companies stand to suffer in any meaningful way.

"It's trivial," Ross said.

The Commerce secretary argued that the tariffs would add only about $175 to the cost of a $35,000 car - one half of 1 percent.

Ross also held up a Campbell's Soup can to illustrate what he called the negligible effect that steel tariffs would have.

"In the can of Campbell's Soup," Ross said, "there's about 2.6 pennies' worth of steel. So if that goes up by 25 percent, that's about six-tenths of 1 cent on the price of a can of Campbell's Soup.... Who in the world is going to be too bothered by six-tenths of a cent?"

Trump has built a deep connection to the steel industry, rooted in promises he made on the campaign trail in 2016. At rally after rally, Trump blamed past trade deals and Chinese dumping for closing U.S. steel plants. He vowed to revive the industry and to "put American-produced steel back into the backbone of the country."

"We are going to put the miners and the factory workers and the steel workers back to work," he told a rally in Scranton, Pennsylvania, the day before the election.

On Friday, the president tweeted: "Our steel industry is in bad shape. IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY!"

As it happens, America's steel industry has received government protection from foreign competition for decades. Washington has muscled other countries into agreeing to limit how much of their steel could enter the United States or has accused them of dumping steel at unfairly low prices.

"You had voluntary import restraints under Reagan, quotas under Carter, anti-dumping (cases) under Bush 1," says Dan Ikenson, director of the libertarian Cato Institute's Center for Trade Policy Studies.

In 2002, President George W. Bush imposed tariffs on steel imports to help a struggling steel industry. A study sponsored by steel-consuming companies found that those tariffs cost 200,000 American jobs by driving up the costs for companies that buy steel and forcing them to lay off employees.

As of mid-2017, the U.S. government was imposing 149 different restrictions on steel imports.

Trump's trade team is stocked with veterans of battles over the steel trade. As a trade lawyer, U.S. Trade Rep. Robert Lighthizer represented steel companies. As a private investor, Commerce Secretary Ross bought and revived troubled steel companies.

Yet previous trade sanctions have failed to stop a steady drop in America's steel jobs. When the 2002 tariffs were imposed, for example, U.S. steel companies employed 169,000 workers. They've since lost 32,000 jobs, a 19 percent drop.

"The steel tariffs and quotas have never done much to protect the industry in the long run," says Kent Jones, an economist at Babson College and the author of "Politics vs. Economics in World Steel Trade." ''Employment in the industry has declined constantly."

The culprit might not be foreign competition. A bigger threat is technology. Allan Collard-Wexler of Duke University and Jan De Loecker of Princeton have found that steel jobs vanished because of the rise of a new technology: Super-efficient mini-mills that make steel largely from scrap metal.

Nonetheless, there's widespread agreement that overproduction by China has flooded world markets with steel and hurt steel makers by depressing prices. But Trump's tariffs wouldn't likely do much to solve that problem. Thanks to trade barriers, China is only America's 11th-biggest supplier of imported steel. Unless the administration decides to exempt countries from his tariffs - unclear for now - the sanctions would fall hardest on a staunch ally, Canada, which ranks No. 1, accounting for 16 percent of America's steel imports.

Trump has brought a little-used weapon to his fight to protect steelworkers: Section 232 of the Trade Expansion Act of 1962. This provision authorizes the president to restrict imports and impose unlimited tariffs on national security grounds.

"It's an unconventional approach," says Dean Pinkert, a partner at Hughes Hubbard & Reed and a former commissioner on the U.S. International Trade Commission.

Since the United States joined the World Trade Organization in 1995, it has pursued only two such investigations. On both occasions - a 1999 case involving oil imports and a 2001 case concerning iron ore and steel imports - Commerce declined to recommend sanctions.

The thinking is that a healthy industrial base is crucial to the nation's military. But to many trade analysts, the administration's case looks weak: The Pentagon says just 3 percent of U.S. steel production goes toward defense and worries that across-the-board the tariffs will antagonize U.S. allies.

Still the WTO gives countries broad leeway to define their own national security interests and could prove reluctant to declare Trump's steel tariffs a violation of global rules. If so, other countries might go outside the WTO and retaliate against the United States, perhaps by using national security as a justification for imposing their own tariffs.

"Nobody wins a trade war," says Babson's Jones.

WASHINGTON (AP) - President Donald Trump on Friday insisted "trade wars are good, and easy to win," a bold claim that prompted threats of retaliation against U.S. exports like blue jeans and motorcycles.

"Make no mistake: If the president goes through with this, it will kill American jobs -- that's what every trade war ultimately does," said Sen. Ben Sasse, a Nebraska Republican.

Trump has declared that the U.S. will impose punishing tariffs on steel and aluminum imports. The move will likely raise steel and aluminum prices here. That's good for U.S. manufacturers. But it's bad for companies that use the metals, and it prompted red flags from industries ranging from tool and dye makers to beer distributors to manufacturers of air conditioners. The American International Automobile Dealers Association warned it would drive prices up "substantially."

Markets tumbled in Asia, where China had already expressed a "grave concern" about U.S. trade policy. And the European Union promised retaliation against American exports if Trump follows through. In the United States, the S&P 500 dropped as much as 1.1 percent before paring its decline.

"None of this is reasonable, but reason is a sentiment that's very unevenly distributed in the world," said Jean-Claude Juncker, president of the EU's executive body.

Asked if a trade war is brewing, he said: "I can't see how this isn't part of war-like behavior."

Early Friday, Trump took to Twitter to defend himself: "When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

He later tweeted: "Our steel industry is in bad shape. IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY!"

Sen. Sasse echoed a sentiment of many U.S. lawmakers when he issued a statement in response: "Kooky 18th century protectionism will jack up prices on American families."

Trump's announcement came only after an intense internal White House debate. It brought harsh criticism from some Republicans and roiled financial markets with concerns about economic ramifications.

Trump has long railed against what he deems unfair trade practices by China and others. This week, he summoned steel and aluminum executives to the White House and declared he would levy penalties of 25 percent on imported steel and 10 percent on aluminum imports. The tariffs, he said, would remain for "a long period of time," but it was not immediately clear if certain trading partners would be exempt.

"This is going to have fallout on our downstream suppliers, particularly in the automotive, machinery and aircraft sectors," said Wendy Cutler, a former U.S. trade official who is now vice president of the Asia Society Policy Institute. "What benefits one industry can hurt another. What saves one job can jeopardize another."

Steel-consuming companies said steel tariffs imposed in 2002 by President George W. Bush ended up wiping out 200,000 U.S. jobs.

The decision had been strenuously debated within the White House, with top officials such as economic adviser Gary Cohn and Defense Secretary Jim Mattis raising concerns.

The penalties were pushed by Commerce Secretary Wilbur Ross and White House trade adviser Peter Navarro, an economist who has favored taking aggressive action.

Mattis, in a memo to Commerce, said U.S. military requirements for steel and aluminum represent about 3 percent of U.S. production and that the department was "concerned about the negative impact on our key allies" of any tariffs. He added that targeted tariffs would be preferable to global quotas or tariffs.

Plans for Trump to make an announcement were thrown into doubt for a time because of the internal divisions. The actual event caught some top White House officials off guard and left aides scrambling for details. Key Senate offices also did not receive advance notice.

White House press secretary Sarah Huckabee Sanders said the decision "shouldn't come as a surprise to anyone," noting that the president had been talking about it "for decades." On Friday, she told reporters that Trump wasn't concerned about the day's market decline, adding that the "president is still focused on long term economic fundamentals."

Sasse wasn't the only Republican in Congress who was plainly upset.

GOP Sen. Pat Roberts of Kansas, chairman of the Senate Agriculture Committee, said, "Every time you do this, you get a retaliation and agriculture is the No. 1 target." House Speaker Paul Ryan, R-Wis., said through a spokesman he hoped Trump would "consider the unintended consequences of this idea and look at other approaches before moving forward."

Trump met with more than a dozen executives, including representatives from U.S. Steel Corp., Arcelor Mittal, Nucor, JW Aluminum and Century Aluminum. The industry leaders urged Trump to act, saying they had been unfairly hurt by a glut of imports.

"We are not protectionist. We want a level playing field," said Dave Burritt, president and chief executive officer at U.S. Steel.

 

WASHINGTON (AP) - President Donald Trump's plan to slap taxes on steel and aluminum imports was branded Friday as "absolutely unacceptable" by Prime Minister Justin Trudeau of Canada, the United States' biggest foreign source of both metals.

Trump hasn't sparked a trade war - yet. But his provocative action has raised the risk of an all-out conflict that could pit the United States against its friends and the entire global financial system that it helped create after World War II. When Trump announced Thursday he was imposing a 25 percent tariff on steel and 10 percent tariff on aluminum on national security grounds, he set into motion the possibility that trading partners would fight back with tariffs of their own.

The rebukes delivered on Friday suggested that some countries were prepared to retaliate if necessary.

Trudeau stressed in his comments he was prepared to "defend Canadian industry" and that the tariffs would also hurt U.S. consumers and businesses because prices could rise.

The 28 countries in the European Union could respond by taxing goods that are core to the American identity such as Bourbon whiskey, blue jeans and Harley Davidson motorcycles, said Jean-Claude Juncker, president of the European Commission.

"I don't like using the word trade war, but I can't see how this isn't part of warlike behavior," Juncker told German media.

Roberto Azevedo, the director-general of the World Trade Organization, warned that a "trade war is in no one's interests."

China - the world's largest steel producer and Trump's primary target - stayed quiet about how it would respond.

Trump's fellow Republicans urged caution. Doug Andres, an aide for House Speaker Paul Ryan, said that Ryan "is hoping the president will consider the unintended consequences of this idea."

But the U.S. president appears to be in battle mode.

He views the tariffs as a way to pressure trading partners into submission and wipe away the long-standing trade deficit.

"Trade wars are good, and easy to win," he said on Twitter.

Commerce Secretary Wilbur Ross downplayed the risk of rising prices from the steel and aluminum tariffs. He held up cans of Campbell's soup and Coca-Cola during a CNBC interview, noting that each would go up by less than a penny under the new taxes.

Even if Trump is itching for a trade war, it's not clear if one will materialize.

"It's too soon to tell for a whole host of reasons," said Scott Lincicome, a trade lawyer and adjunct scholar at the libertarian Cato Institute.

Because there are no formal declarations, Lincicome said the "imaginary threshold" for this kind of showdown would involve countries imposing a broad set of tariffs that choked off trade, rather than taxes on the two basic categories of steel and aluminum being proposed by Trump.

The battle would extend beyond the exchange of goods to include services and investments among nations.

For the time being, so much depends on a set of unknowns, such that the only sure thing is that the risks of a breakdown in trade have increased.

The White House has promised more details next week when the president signs the tariffs into law.

But questions linger.

Would Trump apply the tariffs to political and economic allies such as Canada, Japan and South Korea? Ross only suggested on CNBC that the tariffs would be broad.

Would any products get excluded? There's big differences among the types of steel and aluminum. A metal such as aluminum is used for the foil to wrap Hershey's Kisses chocolates as well as the frame for a Boeing 787 airliner.

The answers to these questions could determine how other countries respond.

Joseph Brusuelas, chief economist at the consultant RSM, sees three possible stages in any trade war.

There could be a "lite" trade war in which partners challenge the tariffs in WTO courts and retaliate with their own targeted import taxes. The next step could involve a broader array of tariffs that seek to penalize large U.S. banks and leading technology firms such as Amazon and Facebook. And, then, "if that spins out of control," there could be a breakdown in trade agreements, the creation of non-tariff barriers and limits to the flow of money among countries.

Yet simply by pinning his tariffs on national security - despite indications that steel and aluminum imports aren't a risk for the U.S. military - Trump may have already started to unravel the rules that hold the global trading system together, said Philip Levy, a trade adviser in the George W. Bush administration and now an adjunct professor at Northwestern University.

"If a country need only mutter the words 'national security' to throw up protectionist barriers, we may soon a proliferation of obstacles to trade - that would be a trade war," Levy said.

___

Associated Press writers Lolita C. Baldor, Zeke Miller, Darlene Superville, Tom Krisher and Kevin Freking contributed to this report.

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