Trump’s Risks Trade War With Allies Over Manufacturing Tariffs

By Alex Dombrowski, Opinion Writer

On March 8, President Donald Trump implemented a 25% tariff on steel and a 10% tariff on aluminum, angering Canada and Mexico, as well as allies in the European Union, which has threatened to retaliate with tariffs of their own on American products. Canada and Mexico were given an exemption to the new tariffs under the provisions of the North American Free Trade Agreement, (NAFTA) a policy that Trump has been extremely critical of on the campaign trail and in office.

Trump rationalized these tariffs as an attempt to revitalize the U.S. manufacturing industries, claiming that the increased price on foreign goods will lead to a greater reliance on domestic production, helping the domestic industry increase production and hire more workers. He also cited national security as a main reason to take control of the U.S. steel supply by avoiding reliance on foreign imports. Additionally, Trump insists that the U.S. will win any trade war that it enters into, and that the U.S. will be better for it.

The move sparked immediate condemnation from foreign governments and industry leaders across the E.U, Asia, and the Americas.

“If you put tariffs against your allies, one wonders who the enemies are,” Marion Draghi, the president of the European Central Bank, said. Trump’s tariffs have the potential to alienate the E.U. from the U.S, and they have already released a 10 page long list of U.S. products that are considering implementing retaliatory tariffs on. Products on this list include denim, motorcycles, peanut butter, and bourbon, and tariffs could be as high as 25% on any of these products, according to CNN.

So the question remains, are these tariffs worth setting off a trade war and alienating our allies?  From a U.S. perspective, the gains in manufacturing jobs from these tariffs will very quickly be offset by the retaliatory tariffs from the E.U, Japan, and China, if a trade war does actually start. Currently, the U.S. only produces about 5% of the world’s steel and is the largest steel importer in the world. In comparison, China produces 50%, and the E.U. produces 10%. Even though most U.S. factories are only operating at about 75% capacity, the U.S. would still be the world’s largest steel importer if their factories were all operating at capacity. Combine the still pressing need to import steel with the sanctions from the E.U. and China, and the U.S. manufacturing industry is facing a future where Europe and China are imposing tariffs on U.S. products, leaving the industry in an even worse situation then it finds itself in currently.

Can the U.S. win a trade war if China gets involved? The short answer, not without our allies. With these tariffs, Trump has critically damaged his relationship with the European Union, Canada, and Mexico, which, if about to enter into a trade war, would go a long way towards mitigating the damage to the U.S. economy. Former Treasury Secretary Jack Lew summarized the foolish burning of bridges between allies by Trump, saying, “The idea that you can undermine care ally relationships, which have been the most enduring source of mutual defense, in the name of a national security decision? It just doesn’t make any sense.” The national security justification by itself, relies on the assertion that in a time of war, you don’t want to have to rely on foreign imports, but since the U.S. will be importing steel no matter what, that reasoning falls apart very quickly. Allies have long been the most important force in global politics, and the U.S. alienating countries it has a long history of cooperation with threatens national security more than the competitiveness of the U.S. steel and aluminum industries. From the perspective of U.S. economic and national security interests, Trump’s tariffs are an overreaction with possibly dire consequences.

In the event of a manufacturing trade war of any kind, the U.S. would inevitably be pitted against China, so whether key allies like the E.U. side with the U.S. is critical to determining which side will come out ahead. This is why Trump’s unnecessary alienation of the E.U. is shaping up to be a crucial blunder on the international stage. The U.S. cannot win a trade war alone, especially if the entire world is against them. Trump’s economic policy needs to consider this reality, and avoid turning crucial allies against the U.S.

If Trump does not want to risk turning the European Union into an adversary in a brewing trade war, he would be wise to apply the same exemption that Canada and Mexico received to the E.U. and Japan, cementing necessary economic alliances.

 

A version of this article appeared in the Tuesday, March 20th print edition.

Contact Alex at

alex.dombrowski@student.shu.edu

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