Donald Trump and the new GOP are still continuing to show just how short-sighted they are with their policies and proposals. This time we’re talking about trade! Donald Trump is imposing tariff’s on imports of aluminum (10%) and steel (25%), thinking that it will lower costs and create jobs here in the United States. This is just brilliant, at least if you’re a Trump supporter who believes everything Fox News and the Donald tell you.
On the surface, what isn’t there to celebrate? This will encourage companies within the U.S. to “buy American” and help create jobs in the steel and aluminum production sectors! YAY! What could possibly go wrong?
According to Donald Trump, this is in retaliation for China flooding the market with cheap steel. Yes, let’s blame the Chinese for our steel and aluminum import problems. We all know the top place we import steel is… wait a second… Canada? Well, the 2nd biggest place we import steel from is… hold on… Brazil? Cutting to the chase here, China isn’t even in our top 10 of where we import steel from. After Canada and Brazil the list goes South Korea, Mexico, Russia, Turkey, Japan, Taiwan, Germany, and India. I tell you what, though, putting a tariff on steel imports will certainly stick it to China, won’t it? Here is a link on the matter.
So what will really happen with this steel tariff? Well, a couple of things:
- Steel prices in the U.S. will go up. True, this will help the steel industry in the United States. They will be able to sell their steel for more money, therefore more profits, which could even lead to more production and more jobs. There is, however, a downside to this which is…
- Manufacturers within the United States will have to pay more for their steel and aluminum. Steel costing more to be shipped into the U.S. doesn’t mean the price of steel in the United States (produced locally) will go down. Steel prices (much like the prices of all commodities) act on global supply and demand scales, not just United States supply and demand scales. If this, in turn, means the U.S. imports less steel, then there will be less supply of steel in the United States. Anybody with a basic understand of economics know how supply & demand works. If supply goes down, a product is more scarce, therefore the price will go up.
- This will then lead directly into the consumer having to pay for those tariffs. If your vehicle, appliance, hardware, building supplies, etc. cost more, as a company you then charge more for your product. If you’re charging more for your product, demand for your product will decrease. You also won’t necessarily see more profit, as a company will increase their price for the consumer based on their profit margin. (i.e. if it costs me $10 to make a product, and I want to make $3 per product, I charge a consumer $13 for my product. If it now costs me $12.50 to make my product, and I still want to make $3 profit on my product, I now charge the consumer $15.50 for my product)
Ultimately by the end of these tariffs it will be us, the consumer, who have to pay for it. Sure, if you work in the steel industry you company might hire a couple more people. Sure, you might even see your pay increase, if ownership deems your living expenses as more important than their bottom line. For the rest of us, however, we’ll see demand for finished products go down as prices go up. This means manufacturing jobs will start to fall. This means more jobs will be lost. Yay short term gains! We’ll pay for it with long-term losses. Thank you Mr. Trump!
The other long-term effect, which isn’t too long term anymore, that we will see is the U.S. effectively pissing off all of our trade partners! Donald Trump is essentially blaming the entire world for economic issues within the United States. Listening to this blubbering man-child go on about how the U.S. is the victim of bad trade deals would be laughable, if it wasn’t so god damn scary. What is going to happen when other countries retaliate to our tariffs we impose on raw goods and start implementing tariffs on our manufactured goods? The same manufactured goods that we create with those (now more expensive) raw goods? Demand will continue to plummet. Jobs will continue to be lost due to decreased demand. Dammit though, at least we’ve created a couple of good steel jobs, haven’t we?
Donald Trump and his GOP followers continue to show just how extremely stupid and short-sighted they are with their policies, one after the other. We voters need to make sure we’re watching the long-term game, especially when November elections come! If not, the United States’ standing as a global leader might be irreparably damaged, all thanks to the symptom of being a Republican.
Stay tuned for Part IV, as this current administration has given plenty to talk about.