Trump is shooting himself in the foot on trade. From the editors of the Wall Street Journal, via zerohedge.com:
With Peter Navarro egging him on, and a handful of US steel and aluminum producer CEOs patting him on the back, President Trump’s decision to impose tariffs has prompted worldwide outrage from the establishment as a sign of impending trade wars and the end of the world as we know it.
While many are purely political kneejerk reactions – just as anything Trump does is a negative (think “crumbs”) to those on the ‘other’ side – The Editorial Board at The Wall Street Journal, believe that Donald Trump made the biggest policy blunder of his Presidency Thursday by announcing that next week he’ll impose tariffs of 25% on imported steel and 10% on aluminum.
This tax increase will punish American workers, invite retaliation that will harm U.S. exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms.
The Dow Jones Industrial Average fell 1.7% on the news, as investors absorbed the self-inflicted folly.
Mr. Trump has spent a year trying to lift the economy from its Obama doldrums, with considerable success. Annual GDP growth has averaged 3% in the past nine months if you adjust for temporary factors, and on Tuesday the ISM manufacturing index for February came in at a gaudy 60.8. American factories are humming, and consumer and business confidence are soaring.
Apparently Mr. Trump can’t stand all this winning. His tariffs will benefit a handful of companies, at least for a while, but they will harm many more. “We have with us the biggest steel companies in the United States. They used to be a lot bigger, but they’re going to be a lot bigger again,” Mr. Trump declared in a meeting Thursday at the White House with steel and aluminum executives.
No, they won’t. The immediate impact will be to make the U.S. an island of high-priced steel and aluminum. The U.S. companies will raise their prices to nearly match the tariffs while snatching some market share. The additional profits will flow to executives in higher bonuses and shareholders, at least until the higher prices hurt their steel- and aluminum-using customers. Then U.S. steel and aluminum makers will be hurt as well.
Mr. Trump seems not to understand that steel-using industries in the U.S. employ some 6.5 million Americans, while steel makers employ about 140,000. Transportation industries, including aircraft and autos, account for about 40% of domestic steel consumption, followed by packaging with 20% and building construction with 15%. All will have to pay higher prices, making them less competitive globally and in the U.S.
To continue reading: WSJ Editors: “This Is The Biggest Policy Blunder Of Trump’s Presidency”