- What official reason was given for the implementation of these tariffs?
The reason given by the Trump regime for the implementation of these tariffs was to bring back American jobs in the steel and aluminum sectors. These jobs were lost due to the importation of cheap steel and aluminum from foreign countries. Moreover, the Trump regime cited that global oversupply of steel and aluminum metals headed by China threatened the survival of steel and aluminum producers in the United States (“US Tariffs: Steel and Aluminium Levies Slapped on Key Allies.”).
- Who will receive the most benefit from these tariffs and who will be harmed by them?
These biggest beneficiaries from these tariffs are the U.S. producers of steel and aluminum. The imposed tariffs would raise the prices of these metals leading to the stability and expansion of U.S. steel and aluminum firms. The expensively imported metals will also shift demand to the local metals hence increasing the profits of these producers. Other minor beneficiaries of these tariffs include the individuals who stand to secure jobs due to increased capacity in local steel and aluminum production and the treasury. The latter will benefit from the increased revenue collections as a result of these tariffs.
The parties that will be harmed by this policy are the majority. They include the consumers of steel and aluminum products, the U.S. economy, and trading partners who have majored in steel and aluminum like Canada and Mexico. The onset of these tariffs raised the prices of automobiles, construction, and machinery manufacturing (Isidore). These increased prices will be borne by the common citizen. Secondly, the U.S. economy stands to lose because of the ripple effects of this policy. The increased local prices of steel and aluminum products would reduce savings and hence reduce investments. Moreover, the counter tariffs initiated by other countries on U.S. products would end up adversely affecting the country’s balance of trade. Unless the gains from the tariffs outweigh the retaliatory losses and the domestic ripple effects, the U.S. economy is likely to lose though not considerably. Trading partners like Canada and Mexico will lose considerably since they will be forced to part with more cash. This could lead to retrenchment of workers in the steel and aluminum companies and a drop in their GDP.
- Relate these tariffs to the economic principle of comparative advantage and discuss what will happen to the production and prices of those products that use steel and aluminum.
The principle of comparative advantage advocates for a country to produce the product it has a comparative advantage in its production and import that which it has a comparative disadvantage in its production. As such, the cost of production for the product in which a country has a comparative advantage is low leading to low prices of these products. Nations like Canada and Mexico have a comparative advantage in the production of steel and aluminum over U.S. Imposing tariffs on their produced metals will increase their prices considerably. A product such as vehicles that use these metals in their production will experience a significant increase in their price due to the increased cost of production.
- Explain why some American companies might be opposed to these tariffs.
Some American companies such as those in the agricultural sector are against these tariffs. The U.S. has a comparative advantage in the production of crops like soybeans and sorghum. Retaliatory tariffs against these products are likely to follow hence affecting the volume and price of exports. This will adversely affect these agricultural companies.
- What do you think will be the economic consequences of these tariffs, both domestically and globally?
These tariffs will have a negative effect on both the domestic and global economy of U.S. traders. This is especially so if these countries pursue a retaliatory tariffs policy as already done by China. Secondly, these tariffs could trigger global trade wars that would affect the global economy negatively.
- Do you believe the implementation of these tariffs was a good idea? Why or why not?
I believe the implementation of these tariffs was a misinformed idea. Though the policy will yield temporary positive effects such as the creation of jobs, it is the long term effects that are worrisome. The created jobs in the steel and aluminum sector could be offset by the layoffs in the agricultural sector following retaliatory tariffs. The increased local prices of steel and aluminum products are also likely to raise the price of household appliances and automobiles.
“US Tariffs: Steel and Aluminium Levies Slapped on Key Allies.” BBC News, BBC, 31 May 2018, www.bbc.com/news/world-us-canada-44320221.
Isidore, Chris. “What Aluminum and Steel Tariffs Will Mean to You.” CNNMoney, Cable News Network, 31 May 2018, money.cnn.com/2018/05/31/news/economy/aluminum-steel-tariff-impact/index.html.