The President Recklessly Defends Tariff Talk

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Trump tariff

President Donald Trump’s decision to enact a protectionist tariff on Chinese steel and aluminum could be a page straight out of a history book. As in, the 1930s and a little American hiccup known as The Great Depression…

On Thursday, Trump ignored warnings from economists and opposition from his party and announced tariffs on steel and aluminum from China. Thankfully, he had to walk the announcement back because there is no official proposal crafted yet. But that did not slow Trump down much, if at all.

Perhaps the irony is lost on the president, however, as his companies notoriously rely on cheap building materials from overseas.

Hypocrisy aside, the president’s advisors have warned him that unilateral trade decisions are risky. These decisions tend to kick off trade wars which can be disastrous especially in our new era of a global economy.

After his announcement, the fear of retaliatory tariffs and a trade war resulted in the Dow Jones plummeting nearly 500 points.

But Trump defended his tariffs on Friday morning while calling a trade war a “good” thing.

However, history shows that protectionist tariffs do more harm than good to the economy.

The Smoot Hawley Tariff of 1930, another tariff passed by Republicans and signed by a Republican president, aimed to protect American businesses but ended up exacerbating the Great Depression.

President Franklin Roosevelt would eventually end the tariffs in 1934 and begin negotiating trade agreements; something American presidents continue to do – or rather, continued to do until apparently, just now. President Trump campaigned on a platform of rolling back existing trade agreements like NAFTA, but this new direction threatens free trade altogether.

While a tariff on steel and aluminum would benefit American steel and aluminum companies in the short term, Europe and Asia will likely retaliate with tariffs against American products that will harm other American industries and the American economy as a whole.

For example, China is the largest buyer of American soybeans. As such, a tariff on soybeans could deal a staggering blow to American farmers, a voting block that leaned Trump and Republican in 2016.

Europe could also cripple American manufacturing, an already fragile part of our economy, with a retaliatory tariff of their own. Retaliatory tariffs would bring market instability, which would put investors on edge and result in stock market losses.

Granted, something has to be done to slow China dumping cheap steel on the American market, but a unilateral tariff is a risky move.

Also, Trump is obsessed with revenge and retaliation, which means he will likely respond to retaliatory tariffs with new tariffs and kick off a vicious cycle that will ravage our economy, an economy that had been recovering very nicely over the last several years of the Obama administration after the Great Recession in 2008.

For the last year, Trump benefited from Obama’s economic legacy. Now, because of Trump’s tax plan and his trade war, Americans get to see what Trump’s economy will look like and it is not going to be pretty.

 

Featured Image: YouTube screenshot

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