Trump tariffs have world traders steeling for conflict

Published March 3, 2018
This file picture taken on May 20, 2017 shows a Chinese worker checking aluminium tapes at an aluminium production plant in Huaibei, east China’s Anhui province. China called on the United States on Friday to “exercise restraint in using trade protection tools” after President Donald Trump announced plans to impose new tariffs on steel and aluminium.—AFP
This file picture taken on May 20, 2017 shows a Chinese worker checking aluminium tapes at an aluminium production plant in Huaibei, east China’s Anhui province. China called on the United States on Friday to “exercise restraint in using trade protection tools” after President Donald Trump announced plans to impose new tariffs on steel and aluminium.—AFP

PARIS: By opting to place heavy tariffs on imports of steel and aluminium, US President Donald Trump is on the surface hoping to protect jobs at home.

Yet his policy threatens not only to frustrate trade partners but also cost US workers dear, many analysts as well as global trade bodies fear.

Trump says he will impose next week 25 per cent tariffs on steel imports and 10pc on aluminium in a policy move that has caused consternation around the world, from the European Union to Canada via China.

Steel dumping has been a source of global trade friction for some years but Trump has framed his policy as a matter of economic and national security.

This is “because globally there is over capacity in steel, and jobs are concentrated in areas that have suffered from deindustrialisation,” said Nigel Driffield, professor of international trade at Britain’s Warwick Business School.

The importance of steel and aluminium in international commerce derives notably from their use in crucial economic sectors such as construction and infrastructure as well as the automobile industry, but also beyond — for instance, aluminium drinks cans.

Canada, Brazil, Korea

“Also, in the west there is a tension between those that produce steel, typically in Europe with high energy prices, and those that use steel who are happy to buy cheaper steel from Asia,” said Driffield.

Last year, the United States imported 35.6 million tonnes of steel — equivalent to some 36pc of the country’s consumption, worth $33.6 billion, according to analysts from Wood Mackenzie.

Yet China, the world’s top steel producer, accounted for a mere 2.9pc of US imports — and only 1.4pc of overall Chinese exports of the metal totalling 74.82m tonnes.

“Thus, the steel tariffs will not have much impact on Chinese steel exports and China does not have as much to lose as the traditional US trading partners,” noted Wood Mackenzie senior analyst He Ming.

“The proposed protection measures will have more negative impact on steel imports from Canada, Mexico and Brazil. South Korea, the largest source of US imports from Asia, will be heavily hit if the US imposes steel tariffs,” he added.

South Korea has already complained to the World Trade Organisation over five steel anti-dumping duties and countervailing measures imposed by the United States.

Ming concluded in a commentary that the tariffs will “not solve the underlying problem of high cost of steelmaking in the US” and would ultimately cost jobs.

Those concerns were echoed Friday by the European Union and the WTO, whose director-general Roberto Azevedo noted that “a trade war is in no-one’s interests. The WTO will be watching the situation very closely.”

‘Rust belt’

Trump’s policy may play well initially in the “rust belt” — home to in-decline heavy industry where he picked up a sizeable number of disaffected voters’ ballots in 2016.

Asked if the policy will go down well with this constituency, Driffield said: “Well he thinks they will. The rust belt is his key working class constituency. This will play very well with them, who feel that they have been unfairly hit by cheaper competition from Asia.” But Driffield said any benefits of such protectionism were liable only to prove very short term.

Economists from the Berenberg group, have voiced fears about the longer-term wider impact of what they termed a “wrong-headed” policy.

“Whatever the reason, imposition of these tariffs is bad economic policy and its timing is inopportune, in our view,” the group indicated.

Although tariff fees would be dwarfed by overall volume of imported goods, “the danger is if these tariffs adversely jar confidence — perhaps fuelled by foreign retaliation — heightened uncertainties would lead businesses to tone back their expansion plans,” leading to a “material” negative economic impact through reduced trade flows.

The Berenberg group’s Mickey Levy and Roiana Reid said the “history of international trade policy shows that the nations that impose barriers to trade are hurt the most” and said the Trump administration “would be wise to reconsider and withdraw its proposal.”

Published in Dawn, March 3rd, 2018

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

United stance
Updated 13 Nov, 2024

United stance

It would've been better if the OIC-Arab League summit had announced practical measures to punish Israel.
Unscheduled visit
13 Nov, 2024

Unscheduled visit

Unusual IMF visit shows the lender will closely watch implementation of programme goals to prevent it from derailing.
Bara’s businesswomen
13 Nov, 2024

Bara’s businesswomen

Bara’s brave women have proven that with the right support, societal barriers can be overcome.
System failure
Updated 12 Nov, 2024

System failure

Relevant institutions often treat right to internet connectivity with the same disdain as they do civil and political rights.
Narrowing the gap
12 Nov, 2024

Narrowing the gap

PERHAPS a pat on the back is in order for the ECP. Together with Nadra, it has made visible efforts to reduce...
Back on their feet
12 Nov, 2024

Back on their feet

A STIRRING comeback in the series has ended Pakistan’s 22-year wait for victory against world champions Australia....