EVAN HOROWITZ | QUICK STUDY
With his own party in revolt — and trading partners around the world threatening retaliation — President Trump signed an order introducing new tariffs on imported steel and aluminum. And in a last-minute twist, he granted temporary exemptions for Canada and Mexico, a move that had been ruled out earlier this week.
The announcement capped a frenetic week since Trump first revealed his plans, including the resignation of a key economic adviser. And it launches the United States into relatively uncharted policy territory.
Tariffs fell out of favor 80 years ago and have been used sparingly ever since. The average tariff at the turn of the 20th century was 27.5 percent, but it has since fallen to a relatively trivial 1.5 percent.
Why reach for such an outdated tool? To some degree, it’s about politics. Promising to fight for US manufacturers — with every available weapon — has some appeal for the older, working-class voters who have long been central to his political success. And doing so now, before next Tuesday’s hotly contested House primary in steel-heavy Pennsylvania, could help swing the race to the Republican.
But it’s also true that Trump has a unique perspective on the past, seeing glory and statemanship where others see something more timebound. Hence his backward-looking campaign slogan, “Make America Great Again,” not to mention his attachment to declining industries such as coal.
This much is true: In the era when America built its industrial and manufacturing base, it really did have high tariffs. And so it makes a certain nostalgic sense to think that if we want to rebuild, we should bring those tariffs back.
And Trump could probably strengthen his case if he were focused on protecting burgeoning industries (such as clean energy, where he has introduced limited tariffs, or robotics). Nurturing young and fragile industries is considered one of the few, occasionally effective uses of tariffs.
But steel and aluminum aren’t infant industries; they’re commodity producers with limited growth potential and an employee base that shrinks every time robots get better at doing human jobs. Protecting them from global competition is more a way of holding on to the past than investing in the future.
Even if you take the broader framing — and think of these tariffs as pushing back against China, rather than protecting steel — the same problem crops up. Because while China really has been a great disruptive force over the last few decades, those days are largely over.
Between 2000 and 2007, imports from China killed off around 1 million US manufacturing jobs, with devastating consequences for the mostly male, generally less-educated workers who were disproportionately affected.
But even the recently released “Economic Report of the President” — written by some of Trump’s top economic advisers — finds that this “China shock” was sharpest just after 2001, when China joined the World Trade Organization and gained freer access to US markets. The situation looks different now, with American manufacturing jobs having rebounded and the overall trade deficit with China having largely stabilized.
This is not to say that China is now a fair dealer when it comes to international trade. Its government still places strict limits on foreign business activity, and provides ample subsidies for many state-owned companies.
But even with the proposed steel and aluminum tariffs, there is a question of how much blame really falls on Chinese over-production.
There is little argument that Chinese dumping has indeed created a glut of global steel, holding down prices. But that can’t be the whole story, because most US steel imports don’t come from China. They come from Canada, South Korea, and Brazil, whose steel industries continue to thrive, despite the troubles from China — suggesting there may be some deeper issue with the US steel industry.
Put it all together then and tariffs seem like an outdated tool designed to protect a declining industry from yesterday’s threat — not exactly a ringing endorsement.
But promising to resume fighting — and somehow win — long-last cultural and economic wars is part of Trump’s appeal. And even if he can’t win, sometimes what matters is just his willingness to stand alone and fight for people who have been made to feel expendable.
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