Donald Trumps imposition of global tariffs on steel and aluminum (except for Mexico and Canada) makes no sense.
First off, China is the real villain on metals, and there are already sanctions in place on China for dumping. Trump dismisses this, saying that China is shipping steel through other countries, getting around the existing tariffs. But Trump's own commerce department says only 2% of our steel comes from China.
There's no evidence of any significant transshipping of Chinese steel. And there's no motive for anyone to do it -- there are significant criminal penalties, and competitors are extremely eager to rat you out.
Second, the tariffs will hurt American industry. Wilbur Ross made ridiculous claims about how little steel is used when he said that the price of a $2 can of soup will only go up .6 cents because of the tariffs.
Remember the huge infrastructure projects Trump promised? You know, all the oil pipelines, buildings, roads and bridges Trump will make happen? Those projects literally use tons and tons and tons of steel. They'll all cost a lot more if the price of steel goes up 25%.
Third, it will take a while before American steel producers can ramp up production. And when they do, they'll increase their prices, by probably 20%. Because they can. Giving American producers a monopoly on steel will make everything artificially cost more.
Fourth, other American businesses will take a direct hit from this. Not just from the tariffs that Europe will put on Harley Davidson motorcycles (which will cost more to make because of pricier steel and aluminum), jeans and other signature American products. But because American industry supplies foreign steel producers with raw materials.
For example, Brazil imports metallurgical coal from the United States for use in steel manufacturing. Minnesota exports iron ore and other raw materials used to make steel. Trump's tariffs will hurt all those miners he promised to help during the campaign.
The United States was on track to be a net energy exporter by 2022, but if Trump continues this foolishness for any length of time, that would hurt American natural gas and petroleum exporters, as those industries are natural targets for tariffs in a world that is oversupplied with fossil fuels.
Finally, who really benefits from these tariffs? Russia.
After insulting our European allies for years, Trump is again widening the rifts between the United States and the rest of the world. That inevitably means that Russia gains more power. Europe will drop sanctions against Russia to buy Russian oil and natural gas.
Trump doesn't seem to be colluding with Russia as much as he's a puppet following Putin's orders to hurt America's standing in the world.
The reason that the United States has a trade deficit in the first place is that we are a very rich country. Other countries are able to make steel cheaper than America because their people are poor.
So, yes, Trump's tariffs will eventually eliminate the trade deficit, as American wages drop to the same level as workers in Russia, Brazil, China and Vietnam.
What a lovely vision of the future Trump paints: all the workers in the world making the same dismally low salaries.
If you don't think that's what's on the minds of Trump's cronies in big business, just look at what the stock market does every time the jobs report indicates wage increases (stocks tank) and stagnant wages (stocks soar).
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