President Trump Says Trade Wars Are 'Good and Easy' But History Shows They Kill Jobs and the Economy

On Friday morning, President Donald Trump took to Twitter to defend his decision to increase tariffs on steel and aluminum even if it begins an international trade war because "trade wars are good and easy to win."

The president reportedly flabbergasted his top economic advisers on Thursday by announcing plans for 25 percent tariffs on imported steel and 10 percent tariffs on imported aluminum. The Dow reacted by nosediving 400 points. Although a few U.S. steelmaking stocks made about $1 billion, the rest of the market lost $400 billion on the news.

Senate Finance Chair Orrin Hatch, a pro-Trump Republican, responded to the announcement by saying that the tariffs were "a tax hike the American people don't need and can't afford," and asked the president to consider "all of the implications of raising the cost of steel and aluminum on American manufacturers and consumers."

Trade wars are not "good and easy," said Senator Ben Sasse, a Republican Senator from Nebraska. "Trade creates jobs and lowers prices for American families. Trade wars do the opposite. No trade war has ever worked. We don't want to make America 1930 again."

The United States imports steel from about 100 nations, and brings in four times more steel than it creates at home, mostly from Canada, the European Union and South Korea.

Domestically, the industry has experienced a significant decline over the last 20 years, with a production drop of about 22 percent. Those employed by the industry has fallen by 35 percent since 2000.

But an increase in tariffs could propel the stalling industry into further decline and hurt others too. A number of countries including Mexico, China and the EU have signaled that they'll retaliate with their own tariffs on U.S. exports, making American products less competitive globally. Such a scenario would likely lead to less production and fewer jobs stateside.

"We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk," said European Commission head Jean-Claude Juncker.

In 2002, President George W. Bush imposed steel tariffs for similar reasons, but studies found that the policy change ultimately led to the loss of 200,000 steel jobs. Bush ended the regulation 18 months later.

Much deeper into U.S. history is the anti-trade Smoot-Hawley Act of 1930, which raised tariffs to their highest level since 1828 and led to a trade war. The idea was to protect American farmers, but retaliation from other countries added to the negative impact of the Great Depression. World trade fell by 66 percent between 1929 and 1934. American trade with Europe also fell by about two-thirds.

"The proclamation contained within a Tweet that trade wars are good and easy to win shows a stunning lack of appreciation for history, including the lessons of the Great Depression," said Mark Hamrick, Bankrate.com's senior economic analyst.

A number of ancillary industries also rely on competitively priced steel to keep up with international competition. The American auto industry, a great user of both steel and aluminum, which supports close to seven million jobs compared to the 83,600 employed in steel.

"With one stroke of the pen, much of the promised benefit of tax reform and other administration initiatives aimed at reviving manufacturing and protecting national security could be undercut," said John Bozzella, president and CEO of the Association of Global Automakers, a trade group representing international automakers in the U.S. A statement from the organization added: "More expensive steel and aluminum will not simply raise the price of cars and trucks, It will increase the price of any and all goods that use steel and aluminum—Air Force planes, Navy ships and Army vehicles."

The American Automotive Policy Council, a group that represents Ford, General Motors and Fiat Chrysler released a report condemning the tariffs. "This would lead to lower sales of domestically built cars and trucks in the highly competitive U.S. auto market, a decrease in U.S. auto exports, and a loss of the jobs that those economic activities support. In the end, that would be a net-negative for the U.S. economy, and potentially the U.S. steel industry—the very sector such restrictions were designed to assist," it said.

Even the beer industry could also be hurt by the policy shift.

"Like most brewers, we are selling an increasing amount of our beers in aluminum cans, and this action will cause aluminum prices to rise. It is likely to lead to job losses across the beer industry," tweeted MillerCoors. "We buy as much domestic can sheet aluminum as is available, however, there simply isn't enough supply to satisfy the demands of American beverage makers like us. American workers and American consumers will suffer as a result of this misguided tariff."

Still, the president insists that the tariffs will ultimately help the American economy. "When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win," he tweeted. "Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

President Trump Says Trade Wars Are 'Good and Easy' But History Shows They Kill Jobs and the Economy | U.S.