Trump may impose duties on imports from China

Remigio Civitarese
Marzo 15, 2018

"The market probably correctly viewed this move as weakening internal White House opposition to some of Trump's less market-friendly policies, in particular the President's trade policy", Daiwa strategist Mantas Vanagas said.

And it comes with all the unintended consequences any kind of government intervention carries, probably even higher prices for domestic consumer goods. They encourage American producers to hunker down behind the tax's protective wall, focusing on the captive local market instead of figuring out how to prevail in the rough and tumble of global competition. But they also hurt themselves...(I) f we impose restrictions in turn, we simply add to the harm to ourselves and also harm them as well.

A JP Morgan analysis estimated that fiscal 2019 earnings per share for Deere & Co. could take a 9 percent hit because steel is the biggest contributor to its raw material costs. Many countries condemned the U.S. measures being unilateral and for misusing the national security rationale. This allowed Japanese and European companies to collude in raising their export prices for the United States market.

The safeguard would also satisfy the political objective of President Trump to be seen to be doing something for the steel industry.

Tariff opponents argue that USA military needs for steel and aluminum amount to only 3 percent of domestic production.

Trump has long singled out China as being unfair in its trade practices and for dumping cheap steel on the global markets, depressing prices. This is the exact opposite of the increased worldwide manufacturing prowess that Trump has promised. These gains have been enormous for everyone: The expansion of global trade from 1980 to 2005 launched the greatest period of poverty reduction in world history, with a billion people moved out of abject poverty. He is a strong advocate for bringing back the middle class by returning manufacturing jobs to the states.

The reason is technology. A confrontational approach, however, stands to do much damage to Mr. Trump's eventual successor that - even if they were a professed multilateralist - they would face a steep uphill battle to normalize the transatlantic relationship. Mathematically, that means fewer jobs for steel and aluminum workers. If anything, by hurting downstream industries like auto and equipment manufacturers, the new import taxes will probably kill more factory jobs than they save.

"The European Union, wonderful countries who treat the US very badly on trade, are complaining about the tariffs on Steel & Aluminum". That's not free trade by a free-market nation, nor does China's state-subsidized steel industry operate in a free market. America helped other countries protect their own industries through high tariffs until they could recover.

At the same time the EU should be ready to defend the European steel industry if exports destined for the USA are redirected towards the EU market in sufficient volumes to threaten injury to the EU industry. Countries in Asia and Africa, however, need lots of new steel to fuel their economic development. China warned it would make an appropriate and necessary response. Selling more steel and aluminum overseas is a much better bet than trying to capture a bigger slice of a stagnating pie back home. Economists and experts from blue America and red America alike are warning of a looming trade war that could crumble the USA economy, nearly sector by sector.

"The key issue for global financial markets is whether last week's announcement presages more tariffs being invoked by the [Trump] administration or retaliatory measures being triggered by U.S. trade partners", Said Desaque, founder and CEO of Desaque Macro Research, said in a note for at investment research and analysis firm Smartkarma.

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