"Starting next week. #AMERICA FIRST," United States President Donald Trump tweeted on Monday, referring to Trump’s plan to impose import tariffs of 25 percent for steel and 10 percent for aluminum.
By
BENNY D KOESTANTO
·4 minutes read
AFP/SAUL LOEB
Trump on Monday (5/3) signed three orders on withdrawing the US from the Trans-Pacific Partnership trade deal, freezing the hiring of federal workers and hitting foreign NGOs that help with abortion.
"To protect our country, we must protect American Steel! Starting next week. #AMERICA FIRST," United States President Donald Trump tweeted on Monday, referring to Trump’s plan to impose import tariffs of 25 percent for steel and 10 percent for aluminum.
It seems to illustrate his determination to realize the plan. Trump was unmoved when the White House’s chief economic adviser, Gary Cohn, resigned on Wednesday. Cohn opposed the plan to impose the import tariffs. Trump was not worried about Cohn\'s resignation.
Cohn is the latest official who had decided to leave the White House.
"A lot of people want the job,” Trump tweeted shortly after Cohn resigned.
Trump is furious with the huge deficit suffered by the US in its trade with other countries. The deficit, which totals US$800 billion annually, is due to the US’ poor policy and the results of trade agreements, he said.
He also blamed previous US leaders, claiming they are partly responsible for the loss of job opportunities, as well as the decline or even the loss of prosperity of US citizens.
Trump said he wants to put an end to such conditions. Trump acknowledges the US is weak in almost all trade agreements with other countries.
That, according to him, becomes a boon for friends and opponents of Washington.
"Our steel and aluminum industries are dead. Sorry, it\'s time for a change! Give it back to America," Trump said.
Steel and aluminum appear to be the first two commodities to be tested by Trump in the trade war. If import tariffs on the two products can be fully enforced, similar policy rules will be implemented on other commodities or other products.
Prior to steel and aluminum, the US has imposed import tariffs on washing machines and solar panels. Trump believes the trade war is a good thing and easy to win.
“[…] When we are down $100 billion with a certain country and they get cute, don\'t trade anymore — we win big. It\'s easy!” “
Trump’s import tariff plan might be good for producers of both commodities in the US. An import tariff will make the price of local products of the same quality as imported ones cheaper. However, it is bad news for anyone who needs steel or aluminum because the price will become more expensive due to the decline in supply. That will be the direct impact of Trump\'s policy.
"And if Trump insists on continuing his policy, then causing a trade war, then the entire global economy will suffer," said Quartz economist Preeti Varathan.
In the US alone, Trump\'s policy plan becomes bad news for bigger sectors vital to the US economy, especially those that use steel and aluminum as raw materials for the products they produce.
Steel, for example, is used to make cars, trains and airplanes. The US’ infrastructure projects also mostly use steel, from bridges to excavators and other machines. Miscellaneous equipment made from steel is also used in US oil and gas extraction tools, in addition to steel pipes for their delivery. Do not forget, the US steel industry absorbs 6.5 million workers. Meanwhile, according to Moody\'s, the steel industry employs 140,000 people.
Difficult choice
According to Varathan, in facing higher imported steel prices, steel consumers have three tough choices. One, they accept the price with the consequences of firing workers. Two, they accept the price and are forced to lower their profit margins. The last option is to pass the cost on to the consumers. The three options can all affect the economy and business activities.
According to US trade data, the largest users of imported steel and aluminum are Texas, California, Illinois, Michigan, Louisiana, Pennsylvania, Ohio, and New York, which are the major states in the US.
They import more than $2 billion worth of steel and aluminum, or about 60 percent of the total imports of both commodities on an annual basis. According to a senior research assistant at Max Bouchet\'s Institute of Policy Programs, the risk of Trump\'s choice is likely to weigh on the US economy in general.
The managing director of the International Monetary Fund (IMF), Christine Lagarde, cautioned the risks of a trade war for the global economy. As reported by the Associated Press, world economic growth is expected to slow down. She reiterated her view that nobody will benefit.
“In a so-called trade war, driven by reciprocal increases of import tariffs, nobody wins,” Lagarde said.
Lagarde called on all sides, especially the US, to refrain from taking any swift action and promote dialogues. She also asked the US’ trading partners to refrain from making immediate retaliations. The US and the global economy is at stake.
