Tariffs, Retaliation and Repercussions

(updated July 21st, 2018)

On May 31st, U.S. Commerce Secretary Wilbur Ross announced President Trump’s new tariffs for Canada, Mexico, and the EU: 25 percent tariff on steel imports and 10 percent on aluminum imports. The move has been a long-time promise from Trump in his “America First” campaign, in which the president claims “the United States has been taken advantage of for many decades on trade, and it’s time to always put America’s interests first.”

The tariffs have been highly criticized by both domestic economists and international allies, sparking a trade war with retaliatory tariffs from multiple countries. A June 1st op-ed in The Hill characterized Trump’s move as “the quintessential application of a 19th-century remedy to a 21st-century problem” that will hurt America’s allies far more than it will China.

“Let me be clear: These tariffs are totally unacceptable,” said Canadian Prime MInister Justin Trudeau in response to the new tariffs. The PM announced his country would impose retaliatory tariffs on $12.8 billion worth of U.S. goods, to be put in place on July 1st and remain until the “frankly insulting” U.S. steel and aluminum tariffs are removed.

The EU is promising tariffs of equal value on U.S. products such as blue jeans, motorcycles, boats, and steel, and some have already begun. Several EU leaders and spokespeople expressed their extreme dissatisfaction with the move by Trump. European Commission President Jean-Claude Juncker called the tariffs “totally unacceptable.” Germany spokesman Steffen Seibert said the tariffs bring “the danger of a spiral of escalation, which in the end harms everyone.” Strong U.S. ally French President Emmanuel Macron said the tariffs were illegal.

These growing tensions point to the growing isolation of the U.S. caused by Trump’s “America First” ideology. This was most evident at the G7 summit at the beginning of this month. French Finance Minister Bruno Le Maire told reporters June 1st that “unfortunately we are going to have a G6 plus one with the United States alone against everyone and running the risk of economic destabilization.”

American companies and even fellow Republicans, including House Speaker Paul Ryan, have also spoke out against the move:

“Instead of addressing the real problems in the international trade of these products, today’s action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China,” Ryan wrote in a statement following the tariff imposition. “There are better ways to help American workers and consumers.”

U.S. companies are now having to decide how they will survive the retaliatory tariffs. Most notably, the motorcycle company Harley Davidson, which has operated in the U.S. for over 100 years, announced it would be shifting production of some products outside of the U.S., to countries such as Brazil and Thailand. That move could be permanent. Trump was outraged by their move, tweeting Tuesday, June 26th that Harley Davidson would be “taxed like never before!” if they produce outside the U.S.

Trump has expressed no desire to modify the tariffs, despite the growing international and national tensions it has caused. He claims the move is in the interest of America’s national security. “We are opening up closed markets and expanding our footprint,” he tweeted Tuesday. “They must play fair or they will pay tariffs!”

This seems to be only the beginning of the growing trade war. Trump also claims that the U.S. Commerce Department is almost finished with their study of tariffs on EU cars. The study could lead to further tariffs placed on automobiles exported to the U.S. from EU countries, particularly Germany.

*UPDATE* (July 21st, 2018)

The growing trade war has continued, with China filing a complaint this week with the World Trade Organization (WTO) against the U.S. The complaint is in response to the July 16th release of a list of goods on which the U.S. proposed issuing even more tariffs. The list includes over 6,000 Chinese products estimated at $200 billion.

In their complaint, China says: “the [U.S.] tariffs are typical unilateralism, protectionism and trade bullying. They are a clear violation of the basic WTO principle of most-favored-nation treatment as well as the basic spirit and principles of international law.”

This is just the latest response in the back-and-forth between the two countries. On July 6th, the U.S. enacted 25 percent tariffs on $34 billion in Chinese goods. China replied with equivalent taxes on U.S. exports.




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