Trump’s Terrible Tariffs

This year the Spring 2109 issue of my alumni magazine from the University of Wisconsin-Madison printed a brief article titled, “What’s the Tiff About Tariffs?”

In this article, U.W. Economics professor, Menzie Chinn, alleged that Trump’s tariffs are failing to protect domestic U.S. industries from foreign competition.

In previous posts on Brucenomics, the earliest on December 2016, “The Emperor Has No Clothes,” and the latest on March 12, in “Word of the Day — Tariffs“, I argued that Trump’s tariffs were not likely to improve the U.S. economy.

In early 2018, when I first read about President Trump’s tariffs on Canadian aluminum and steel, I worried his actions might well drive the U.S. into the arms of oligarch-owned companies in Russia. Previously we had bought the bulk of those two raw materials from Canada.

U.W.’s alumni magazine this year confirms my fears.

Professor Chinn and other experts note that unintended consequences have negatively affected companies which depend upon the pricing of aluminum and steel, particularly companies in the U.S. construction industry.

Professor Chinn’s sentiments about these two raw materials are echoed in a recent article from the Council on Foreign Relations on January 28, 2019, “Trump’s Tariffs are Killing American Steel“.

Professor Chinn anticipates that there will be negative outcomes for U.S. workers from President Trump’s actions, a concern I brought up in 2016 after Trump won the election.

That’s because after President Trump imposed tariffs on their goods, other countries retaliated against the U.S.

Trump’s reliance on rarely-used trade laws have created short- and long-term uncertainty in several markets. This has created a reluctance for lenders to lend and domestic companies to expand.

Also because long supply chains are common in manufacturing industries now (like the auto industry, for example), tariffs on parts or components in manufactured products can severely impact of many goods causing them to rise in price.

In On Wisconsin, UW’s alumni mag, Professor Chinn is quoted as saying he thinks there is a “misunderstanding in Trump’s mind about what tariff protection does”.

That’s putting things nicely! I don’t think Trump deserves such kindness. I’m still worried about who we are going to buy our steel and aluminum from!

Will Russian oligarchs, Oleg Deripaska, primary investor in the world’s largest aluminum producer, RUSAL, and Alexander Abramov, head of Russia’s largest steel compnay, Everaz, ultimately be the beneficiaries of Trump’s tariff wars—while American farmers, manufacturers and consumers continue to bear the brunt of Trump’s disastrous economic policies in the future?

And it isn’t just American steel, aluminum, construction and auto industries that are being so severely damaged either! I worry that American farmers and consumers are also beginning to find themselves in dire straits.

This week, where I live, we’ve already seen a $1 increase in the price for a single avocado after Trump merely threatened to close the U.S. Border with Mexico.

While he has stood down for now, Donald Trump is still holding the “sword of Damocles” over our heads— threatening to shut down billions of dollars in trade at our Southern border right before the 2020 election.

Our President’s penchant for regaling his followers with his “poor me” and “poor us” stories of persecution of himself and our country by scores of  “bad guy” enemies both here and abroad is leading our country straight into big, big trouble—way before 2020!