by Russell Irons
In accordance his America First rhetoric, President Trump has initiated a battery of tariffs in hopes of bolstering U.S. industry. A tariff is a tax applied to certain imports, usually intended to protect domestic businesses from foreign competitors. This practice is known as protectionism. This economic ‘strategy’ will only serve to harm the world economy and weaken American industry.
In early March of 2017, Trump announced a plan to place a 25-percent tariff on imported steel, alongside a 10-percent tariff on aluminum. The tariffs applied automatically to all countries excluding Canada and Mexico. Most recently, Trump has decided to place a 25-percent tariff on approximately 1,300 Chinese products ranging from technology to firearms. These new tariffs amount to about $50 billion. The tariffs on steel and aluminum sent the stock market haywire, and investors lost about $9 billion. China has retaliated to the tariffs by placing $3 billion on goods such as wine, pork, and nuts. Chinese officials have said they do not want a trade war, but they are ready for one.
The intent of the tariffs is to stimulate American industries, such as steel, by forcing foreign steel companies to raise their prices. American steel then becomes more appealing to the consumer. Unfortunately, this doesn’t work well in practice because the countries losing out on the trade can retaliate with tariffs of their own. The escalation of tariffs can rapidly spread from the original targeted goods to other key exports, starting a trade war. One of the last major trade wars was in 1930, when the United States passed the Tariff Act of 1930. The tariffs created a domino effect of countries heaping tariffs upon one another, which only worsened the Great Depression. Today, The United States and China are the two largest economies, and a trade war between the two would likely result in ramifications felt worldwide.
Instead of a no-win trade war, Trump should help put America first by fully realizing the country’s capitalist roots and shifting further towards a free-market economy. In a free-market economy, the government does not step in to impose tariffs, and instead lets supply and demand dictate prices. Some American industries would die out when up against China, such as steel, but American steel has been on life-support for decades anyways. Others will see unfettered growth. For instance, Chinese steel being imported to the United States can be bought for cheap by other industries and used to create buildings, vehicles, appliances, and more.
The tariffs will affect more than just the economy. The relationship between China and the United States is already extremely tenuous. China is engaged in a territorial dispute over the South China Sea with a number of countries, including an ally of the United States, the Philippines. China has also been waging an information war on the United States, and is responsible for the theft of a lot of American intellectual property. A trade war with China will certainly not help our relations with them.
The absence of tariffs allows businesses to keep prices low, which greatly benefits the consumer and the global economy. To truly put the average American worker first, Trump should adopt free-market economy ideas and avoid angering emerging superpowers.