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Monday, June 4, 2018

Trump, the Steel and Aluminum Man

Por qubano22005

Everything seemed calm or everything rather seemed to return to calm. The horns of the commercial war had sounded months ago, but now they stopped being heard. Donald Trump made everyone believe that peace would return to the economic levels by restarting renegotiations with China and approaching the great Asian economy again. His statements about ZTE made him forget the tariffs imposed on aluminum and steel, yet the tranquility short-lasted. The president of the United States has lashed out against his closest allies by imposing tariffs on imports of aluminum and steel from Mexico, Canada and Europe, a measure that has generated a stir among those responsible for Economy, Trade and business executives of the countries involved.

Commerce Secretary Wilbur Ross said to the press that a tariff of 25% will be applied to steel imports and 10% to aluminum starting next Friday. These taxes are being announced since March, but Canada, Mexico and the European Union had a postponement, as the White House made the decision to negotiate with its allies, a fact made hopeful United States’ close allies because they imagined that the impositions against them would not be so severe.

The US Department of Commerce has made it clear to them that Americans First, although Ross said negotiations with Mexico, Canada and the European Union can continue even after tariffs begin to be applied.

The US allies are displeased with the policy of the new Yankee president and his at-all-cost protectionism that recalls the ‘30s. However, Washington does not seem to take into account old friendships and even Japan has had to give in to pressures and pay such tariffs.

Angela Merkel recently said that the United States was no longer a reliable ally. The new tariffs on aluminum and steel have caused the wrath of Europe, Canada and Mexico, which have promised to counter-attack.

So far the European leaders have made it clear as well, they will not stay crossed-arms and have told the press the blunder of Washington’s policy they consider as illegal.

French President Emmanuel Macron, who recently visited the White House and shook hands with Donald Trump, tops the list of the angry ones and has declared that "economic nationalism leads to war." "This is protectionism, neither more nor less", said Jean-Claude Juncker, president of the European Commission. Meanwhile, the European Union is expected to materialize its threats to impose tariffs on a list of highly priced American products such as Kentucky’s whiskey, jeans and motorcycles. Nevertheless, it has not been announced yet from where the European backlash will come.

It is known that the new US administration not only purchases to impose sanctions on the Chinese for their excessive development and economic boost that leaves the United States way behind. The current American government has traced its protectionist strategy to give life to several exportable American products that for years have suffered economic losses due to the Chinese products invasion to the market, which have better prices than the American ones.

With the critical move of Donald Trump is expected to raise the American steel and aluminum industries whose levels of commercialization have decreased over the last five years.

Ironically, Trump’ government has sufficient legal arguments to impose such sanctions. Section 232 of the Commercial Expansion Act of 1962 authorizes him to restrict imports and impose unlimited tariffs if the Department of Commerce detects a threat to national security.

But apparently the Department of Commerce and the president himself are using the well-known "threat to security" argument to execute protectionist trade practices that threaten world trade. That is why Europe, Japan and other countries are trying to challenge US tariffs before the World Trade Organization.

While diplomacy lurches to find a solution, workers and business executives inside and outside the United States will begin to suffer the consequences. Despite local companies will be compelled to buy the steel and aluminum produced in their country, other entities that require metals from other nations will experience high economic losses when they have to spend a bigger amount of money.

Stripmatic Products is an example of American companies that will be seriously affected by the prices’ increase. Data from the auto pieces provider company in Cleveland reveal that they have had to spend 40% more money to buy steel. Even its president, Bill Adler, said they lost a juicy contract that would allow them to diversify into a new market: the manufacture of food processing equipment. "We were practically eliminated", he told reporters. According to Adler, it took almost five years his company to recover from the steel tariffs imposed in 2002.

Although Adler's testimony is one more of the many sectors of the American economy that will be affected, Secretary of Commerce Wilbur Ross points out that these are only the tip of the iceberg. Another politician like Paul Ryan and several leading Republicans in Congress suggest that other mechanisms could be used to give American metallurgical industry back its former splendor. From his point of view, Oliver Rakau, an economist at Oxford Economics, considered that this could "derail the recovery of American investments".

The tariffs’ measures that the United States has decided to impose on are only an incentive for its metallurgical industry, which in facts faces a much greater problem than the saturation in the market of Chinese products. In the end, the effects of this erratic policy will affect automobile, canned food, aerospace and electronics industries, just to mention some of them.

Yet, there is still hope that Europe, Mexico and Canada will give in to pressures and renegotiate agreements beneficial to both parties. If so, Donald Trump would be right in his American First policy and slow down a bit the Chinese impulse.