WASHINGTON (Reuters) – President Donald Trump announced on Thursday he would impose hefty tariffs on imported steel and aluminum to protect U.S. producers, risking retaliation from major trade partners like China, Europe and neighboring Canada.
Fears of a trade war triggered a selloff on Wall Street.
Trump said the duties, 25 percent on steel imports and 10 percent on aluminum, would be formally announced next week, although White House officials later said some details still needed to be ironed out.
Trump believes the tariffs will safeguard American jobs, but many economists say the impact of price increases for users of steel and aluminum, such as the auto and oil industries, will destroy more jobs than curbs on imports create.
“We’re going to build our steel industry back and our aluminum industry back,” Trump said.
Shares of U.S. domestic steel and aluminum makers rallied, but shares of companies ranging from auto makers to airplane makers fell on the potential impact of the higher costs they will have to pay for the metals.
The announcement came after what one person with direct knowledge of the discussions described as a night of“chaos” in the White House due to frequent switching of positions in the administration.
The tariffs were sharply criticized by some senior Republican lawmakers as well as industries ranging from autos to oil to construction equipment. A major concern is that U.S. farm exports could be hit hard in retaliation by steel-exporting countries.
“Every time you do this, you get a retaliation. Agriculture is the number one target. I think this is terribly counterproductive for the agriculture economy,” said Senator Pat Roberts, who chairs the chamber’s agriculture committee.
CANADA READY TO RESPOND
China has already threatened to curb imports of U.S. soybeans, and the European Union has said it will consider action as well. President Xi Jinping’s top economic adviser, Liu He, held talks with the Trump administration in Washington on Thursday.
U.S. aluminum premiums hit near three-year high after U.S. flags import duty
FEW MORE JOBS FROM TARIFFS
While American steelmakers lost three quarters of their jobs between 1962 and 2005, a major study by the American Economic Association showed that much of this reflected improved production technology, with output per worker rising fivefold.
“Thus, even if trade protection leads to increased domestic production, increases in employment may be far less than many hope,” a report from the independent Econofact economist network said last week.
“Across many states, the number of jobs adversely affected in these steel-using industries could far exceed any steel jobs saved,” Econofact warned.
The overall impact on the U.S. economy is likely to be muted, barring a major trade war, with steel and aluminum imports accounting for just 2 percent of the overall total.
Investment bank Barclays estimated the tariffs would add 0.1 percentage point to core inflation over a period of time and cut economic growth by 0.1-0.2 percentage point, which would be more than offset by Trump’s fiscal stimulus.
0 comments
Share
