U.S. Faces Billions in Retaliation for Trump's Steel and Aluminum Tariffs Each Year, Says Trade Expert
Countries facing steep import tariffs proposed by President Donald Trump are likely to sue the U.S. for compensation and impose billions of dollars in retaliatory levies, experts say.
Trump vowed last week to impose a 25 percent tariff on steel and 10 percent on aluminum imports to the U.S., sending global markets into a dive that saw the sell-off of shares in companies producing those commodities.
U.S. allies Canada, the European Union, South Korea and Mexico would be hardest hit and are poised to retaliate against the U.S. with billions in levies, according to an analysis of the potential fallout by trade expert Chad Bown, a senior fellow at the Peterson Institute for International Economics, a nonprofit, nonpartisan think tank.
"Trading partners would be permitted to retaliate by a collective amount of $14.2 billion per year," according to Bown, using the Trump administration's own models to calculate the estimate.
The EU is already preparing 25 percent retaliatory tariffs on $3.5 billion worth of imports from the U.S.
Bown's analysis points out that World Trade Organization (WTO) rules "permit a country to retaliate against an action such as the one Trump plans to take if there is a legal finding that the national security rationale is baseless." Trump said the levies are necessary because America's steel and aluminum producers are being squeezed, posing a threat to national security in America's ability to manufacture weapons.
Under the WTO's dispute settlement regime, nations can pre-empt the lengthy process of suing by claiming "they are relying on basic WTO rules to guide their retaliation response," Bown writes.
China, the country that Trump wanted to target most, would be one of the nations least impacted by the president's levies, Bown points out. It could retaliate with only $689 million in levies on U.S. imports.
"The economics don't make a whole lot of sense. We're going to hurt ourselves," Daniel Ikenson told CNBC last week. Ikenson, head of the trade policy group at the Cato Institute, a libertarian think tank, said industries that use steel in the U.S. employ more people than companies that produce it.
Jamie Dimon, CEO of multinational bank JPMorgan Chase, has said Trump's tariffs will "hurt the U.S. economy and American companies, workers and consumers." In a CNBC opinion piece, conservative economists who have backed and advised Trump called the tariffs a "crisis of logic."
In an effort to dissuade Trump, his chief economic adviser, Gary Cohn, director of the National Economic Council, is preparing to bring executives from industries that will be hurt by the tariffs before the president on Thursday.
Yet Trump is not likely to be dissuaded. In a tweet Monday, he doubled down on his proposal, tying it to ongoing renegotiation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico, two of America's largest steel and aluminum traders.
We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must..
— Donald J. Trump (@realDonaldTrump) March 5, 2018
In a Tuesday call with Canadian Prime Minister Justin Trudeau, according to a White House readout, Trump "emphasized his commitment to a NAFTA agreement that was fair to all three countries, noting the current agreement leaves the United States with a trade deficit."
The president's White House trade adviser, Peter Navarro, dismissed the impact of a trade war during an appearance on Fox and Friends Monday. "There are virtually no costs here," Navarro said of the action, which he has long lobbied the president for.
Yet American confectionery maker Hershey—famous for its aluminum foil-wrapped Kisses—has warned that the proposal could have a devastating impact. "We use steel for our U.S. plants and plant expansions and aluminum for our product packaging," Hershey spokesman Jeff Beckman told NPR.
"Such a broad and sweeping order could have a negative impact on the entire U.S. economy, potentially costing U.S. jobs and ultimately hurting American consumers through higher prices for everyday products," he said.
