by Russell Irons ’19
In accordance with his America First rhetoric, President Trump imposed tariffs, or tax applied to certain imports with the intent to protect domestic businesses from foreign competitors, in hopes of bolstering U.S. industry. This economic ‘strategy’ will only harm the world economy and weaken American industry.
In early March of 2018, Trump announced a plan to place a 25-percent tariff on imported steel and a 10-percent tariff on aluminum. The tariffs applied automatically to all countries but Canada and Mexico. Most recently, Trump placed 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 don’t want a trade war, but 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 when the United States passed the Tariff Act of 1930. The tariffs created a domino effect of countries heaping tariffs upon one another, which worsened the Great Depression. Today, The U.S. and China are the two largest economies in the world, and a trade war would result in worldwide ramifications.
Instead of a no-win trade war, Trump should put America first by shifting further towards a free-market economy. In a free-market economy, the government doesn’t impose tariffs, and 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 U.S., 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 American worker first, Trump should adopt free-market ideas and avoid angering emerging superpowers.
According to CNN Money, the looming threat of a trade war caused people to frantically sell stock, which resulted in a 572 point drop in the Dow. The Dow recovered and dropped repeatedly as China and the United States levied increasingly hefty tariffs upon one another. The situation has died down as focus turned to the peace process with North Korea, and the economy has been rising ever since. Most recently, Trump work with Chinese leader Xi Jinping to restart ZTE, a Chinese tech company that violated sanctions and stole American intellectual property. While his approach seems counterintuitive, Trump now seems to be backing off tariffs to bargain with China.