As part of his “America First” principles, president Donald Trump and the steel industry figures he has brought into his administration, including commerce secretary Wilbur Ross, are planning to overrule virtually his entire cabinet to impose 20% tariffs on steel importsThis brings to mind an adage that most of us have heard,
Those who do not learn history are doomed to repeat it.Mr. Trump's Republican predecessor (George W. Bush doesn't seem like such a bad choice for President right now, doesn't he) tried a similar tack in 2002 to appease the steel industry:
In 2002, president George W. Bush imposed tariffs on steel imports for much the same reason as Trump—combatting cheap imports from other countries—but ended them when the World Trade Organization ruled them illegal. Over the 18 months that the tariffs were imposed, a spike in steel prices put 200,000 workers out of their jobsWe live in a connected world in which every action has unforeseen, downstream (or upstream) consequences. This is the issue that protectionist policies fail to take into consideration before drafting new policies and laws. In this particular case, an increase in the cost of raw materials is bound to increase the overall cost of goods sold, which will either be passed on to the consumer (likely) or be absorbed in the organization's balance sheet thereby impacting overall profitability (highly unlikely given the capitalist world in which we live). The only countries that can afford to do this are the likes of China where the government absorbs the impact on behalf of the sectors it supports.
Mr. Trump and his government are fighting legal challenges from multiple quarters already, which has impacted their ability to fill critical government spots (diplomatic ranks are thin) and distracted from the critical task of administering this country. With myopic policies like these steel tariffs to appease their "vote bank", they might be asking for new lawsuits from major industries:
When Bush’s tariffs went into place, Ford and GM challenged him in court. We’re likely to see the same scenario this time around, so expect to see a clash of Donald Trump versus America’s carmakers.Continue to watch this space...