- President Donald Trump’s planned tariffs on aluminum and steel is bad news for pretty much everyone in the US.
- It will even hurt the manufacturing industry Trump thinks he is protecting.
On Thursday, President Donald Trump said that he would soon announce protective tariffs on metals – 25% on imported steel and 10% on imported aluminum.
He brought a whole bunch of steel and aluminum executives to the White House for the announcement, and I’m sure they were happy, because this tariff is going to protect them from foreign competition and allow them to charge higher prices.
Unfortunately, this policy is bad news for virtually everyone else in the US. It’s even bad news for the manufacturing sector that Trump thinks he is protecting.
Despite the myth that US manufacturing is in decline – and despite the very real decline in manufacturing employment – US industrial output is nearly double what it was 30 years ago. Very often, American manufacturers are in the business of making things out of steel and aluminum.
Metal tariffs will hurt American manufacturers that use steel and aluminum by raising their cost for inputs. That will discourage investment and growth, reducing both corporate profits and job creation.
And what if you’re a consumer who buys things made out of steel and aluminum – cars, appliances, canned beer? This policy is going to make you poorer. It will make prices higher, and you won’t get an offsetting wage increase unless you happen to work in steel manufacturing, which you probably do not.
Those problems are all before we even consider the possible effects of retaliatory trade actions – other countries may raise their own tariffs on American exports, which would cost jobs here.
This policy is bad for US business as a whole, which is why its announcement caused stock prices to fall – except steel and aluminum stocks, which went up.
And while the stock market is not the economy, this is one policy where the negative effect on expected corporate profits comes with no silver lining for consumers and workers.
Stock investors fear these tariffs because they expect companies’ costs to go up, and because they are worried that retaliatory tariffs will cause American firms to lose access to foreign markets. To ordinary workers and consumers, those effects will tend to mean higher prices and fewer jobs.
It’s a lose, lose policy – unless you own or work in a steel mill. Steel executives are smiling. You shouldn’t be.