Trump’s Protectionist Quagmire
US President Donald Trump's tariffs on imported steel are a perfect example of how protectionism can raise costs for consumers and producers, destroy jobs, and undermine domestic competitiveness. Now that he is considering additional tariffs on imported automobiles, a wide range of US industries should be very worried.
WASHINGTON, DC – After World War II, the United States led the world in reducing protectionist barriers and establishing an open, rules-based trade system. That effort resulted in a half-century of the most rapid economic growth in human history. But US President Donald Trump’s administration is now reversing that progress. The protectionism that Trump has unleashed is contagious and will likely spread well beyond the industries that he wants to insulate from foreign competition.
Consider imported steel, which the Trump administration targeted with 25% tariffs in March. The stated basis for those tariffs was “national security,” even though US defense industries account for just 3% of the country’s steel consumption. If Trump really is concerned about national security, then one wonders why the US is not keeping ore in the ground as a strategic reserve for future hostilities. At any rate, the tariffs were also imposed on US allies such as Canada, which gives the lie to the national-security argument once and for all. In the case of rivals such as China, steel imports were already subject to tariffs as high as 70%, and accounted for only 2% of US steel consumption.
US import tariffs now apply to 59 different types of steel. If an American company cannot obtain steel inputs domestically, it must either pay the tariff or apply for an exemption (“exclusion”). If it goes the latter route, it must state the quantity and strength of steel that is needed, its chemical composition, the dimensions of the product (pipes or sheets, for example), and so forth; and it must submit a separate application for each type of steel, even if the only difference is in dimensions. Moreover, each application must demonstrate that the applicant has been unable to obtain the steel from domestic sources.