By Shep Gerszberg
On Thursday, President Trump signed an order implementing 25 percent tariffs on steel imports and 10 percent tariffs on aluminum imports. He signed that order against the wishes of Republicans from the House of Representatives and the Senate, against the wishes of vital GOP donors, like Charles Koch, and against all economic common sense and history.
To say that I am disappointed would be a lie because, honestly, I do not expect better from this president. It is obvious why he signed this order, which has the appearance it will help America’s steel and aluminum industries. Trump needs those industries and their workers to win re-election in 2020.
The simple fact is results matter, and this order will not help anyone nor our economy, the global economy, our relations with foreign nations, or even the workers it was designed to help. It will do just the opposite and hurt every one of those industries.
Tariffs have never helped. Free trade allows each nation to do what they do best. There is a simple economic principle called comparative advantage: every nation needs to produce what they are best at and allow the free exchange of goods and services. This allows for the cheapest prices and most free flowing global economy.
Tariffs just slow everything down, raise prices and do not even bring jobs back. Why would a company move back to the United States after implemented tariffs when they can just raise prices and keep their factories in countries with minimum wages that are one-tenth of ours?
They will not. The only reason why jobs are coming back in some industries, as Trump likes to frequently mention, is because of automation. Most of the U.S.’s job atrophy is to automation and when factories automate it is better for them to be closer to better educated coders, engineers, and high-tech sectors here in the States.
Even if industry jobs do return, they will only be temporary as more and more industries and factories automate. The simple fact is that these tariffs will not help the steel industries or their workers, and will instead hurt everyday Americans by raising prices.
History has shown that to be true. Economists say that the Smoot-Hawley tariffs greatly contributed to the start of the Great Depression. In 2002, President Bush implemented similar steel tariffs.
According to analysts, those tariffs cost the U.S. $30 million and actually cost the U.S. jobs because any job growth in the steel industry was outweighed by job losses in other industries.
Because of that, Bush ended these tariffs early when it became clear they were not helping and were likely to start a trade war which would cripple the global economy. If Trump were a student of history, he would see rather clearly that these tariffs are an idiotic idea.
Unfortunately, Trump is not concerned with history, rather he is concerned with optics. But even the optics of this move are bad and will hurt other U.S. and Trump interests.
The only two nations currently exempted from the tariffs are Canada and Mexico, but the European Union and China are still being tariffed. This is incredibly problematic, not only because of threats from the E.U. to implement retaliatory tariffs which would kick off a trade war, but also because of other U.S. interests.
Right now, we are trying to get the E.U. on board with fixing the 2015 Iran deal. Getting their support on threatening increased sanctions if the deal is not fixed is vital in dragging Iran along. These tariffs will not help matters. No matter what Trump says, having allies in the global community is vital to getting anything globally, hence, these tariffs only harm our international partners.
Therefore, if tariffs are harmful, what should the U.S. do to stop these tariffs and boost our economy?
Trump was only able to implement these tariffs thanks to a law from the 1960s giving the president authority to implement tariffs to protect domestic industries deemed vital to national security.
First, Defense secretary James Mattis pointed out that military steel needs can be met with only 3 percent of domestic steel consumption, therefore, this law should not even come into play. Regardless, it is an outdated law working on Cold War ideas. The law needs to be repealed along with the Trump tariffs.
But for the American economy, there are things we need to do to prepare ourselves for the future. We need to fully embrace the reality our industrial economy is dying, and there is nothing we can do to pull ourselves back from that. Our economy simply cannot compete with nations with no minimum wage, almost no corporate tax, and no regulation. No tariff will change any of that.
We need to embrace our move into a 21st-century service economy. We need to implement job retraining programs co-funded by the government and industries and companies which can use the labor. We need to let go of old industries and embrace new ones. Industrial jobs are not coming back, as most of them are not lost to other countries, rather to automation.
We need to step forward not back because holding onto a 20th-century economy will only hinder everyone both nationally and globally. It is time for us to step forward, bravely into the 21st century and the economy that it brings.
Senator Joni Ernst (R-IA) said on Thursday, “We need someone in the White House who understands that we live in a global economy.” These tariffs will only stifle the global economy, potentially enable a trade war, raise prices, and stop us from addressing the real needs of today’s economy.
Enough with protectionism, enough with populism. Let us have our Republican president actually embrace conservatism and capitalism. Free trade is a tide that raises all ships. Trump needs to get on board or risk drowning us all.