Keeping up with the new developments in U.S trade is starting to get as complicated as keeping up with the Kardashians. In the previous episode, The U.S enacted a 25% tariff on steel imports and 10% on aluminum as reported by The Associated Press. Now, many onlookers foreshadow a trade war in our near future. Unless, of course, there is some plot twist coming.
The Beginning of trade overhaul
Since the beginning, the new administration’s mission has been to revive American manufacturing and create new jobs; all for the benefit of the American people. The means to accomplish this would be by ending or revising current trade agreements that interfere with these goals. As a result, NAFTA has been under major scrutiny as it took many U.S jobs to Mexico decades ago. While we will have to stay tuned to see what unfolds with that policy, the government put into place new tariffs that will hit some of our largest trade partners.
Despite international outcries, the controversial taxes took effect on March 23, 2018. This shut out almost everyone except the EU, Canada, Australia, Argentina, Brazil, Mexico, and South Korea. Donald Trump expressed deep concern over the import of steel and aluminum into the United States. He stated that it undermines his fellow countrymen’s ability to self-supply the said materials. So, it seems behind the taxes the intentions were meant to create a positive impact.
On the other hand, Supplychaindive.comreports that exorbitant taxes on essential raw materials would force U.S manufacturers to look elsewhere to deal with rising costs. The governmental action implied that manufacturers would be forced to keep sourcing within the U.S, keeping jobs and production within the domestic economy. As a result, Sourcing Journal Online believes that prices of many industries, especially apparel and footwear, will rise to match the mounting production cost. And, all of which will be passed onto the consumer.
Of the many people who have drummed concerns, there are only a few voices that would resonate more than the Senate Finance Committee Chairman Orrin Hatch’s. Hatch observed that “…if this is the start of a trade war, the only casualties thus far appear to be American manufacturers, American farmers and ranchers, American families and America’s allies.”
Understandably, there were concerns over how the U.S’ major trade partners would react. In fact, Canada, the largest exporter of steel and aluminum to the U.S, has threatened pushback even though they are exempt. CNBC explained that other countries do have the opportunity to apply for exemption. Section 232 of the Trade Expansion Act of 1962 enables the president to impose import tariffs on the grounds of national security. For some, it is believed that the threat, in the eye of the president, is China.
President Trump imposed tariffs as high as 45 percent on commodities imported from the Asian nation. They’ve already responded with a 25 percent tariff on a laundry list of American goods. But still, Trump has maintained his resolve to impose duties on around $30 billion worth of China-made goods. This is in line with section 301 of the U.S Trade Act of 1974, which allows the president to implement tariffs without the consent of the Congress.
Despite growing concerns, the president remains unfazed, saying that “trade wars can be a good thing,” as reported by Sourcing Journal. In the same report, they did mention that congress may be acting out of the belief that an “adjustment to the sourcing matrix is overdue.” So, it could be that this will incite a complete restructuring of U.S sourcing. But the question remains, can this be accomplished without damaging international trade relations with our main partners? Stay tuned.