Steel and Aluminum tariffs can start a trade war, or can be a potent negotiating strategy
Steel and Aluminum tariffs can start a trade war, or can be a potent negotiating strategy

President Donald Trump announced on Thursday Morning that he was having a meeting to “protect and build our Steel and Aluminum industries.”

“Looking forward to 3:30 P.M. meeting today at the White House. We have to protect & build our Steel and Aluminum Industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military,” tweeted Trump. 

Then later in the day, Trump signed the order imposing tariffs on both steel and aluminum imports while surrounded by industrial workers.  

"You are truly the backbone of America, you know that. Very special people," said Trump to the workers. "We have to protect our steel and aluminum industries while at the same time, showing great flexibility with people who are really friends of ours." 

Although Trump has taken a strict stance on trade deals, Canada and Mexico have been exempt from the tariffs, at least for the time being.  

Earlier in the day, White House spokeswoman Sarah Sanders confirmed that the White House was considering sparing Canada and Mexico from the imposed tariffs. 

"There are potential carve-outs for Mexico and Canada based on national security, and possibly other countries as well based on that process. That would be [on] a case-by-case and country by country basis,” said Sanders.

The order introduces a 25% tariff on steel products and 10% on aluminum goods and will be effective in 15 days.  

Trump said, like he has in the past, that Canada and Mexico could remain exempt if a “new and fair” North American Free Trade Agreement (Nafta) is signed.

"I have a feeling we're going to make a deal on NAFTA. I've been saying it for a long time," said Trump. "If we do, there won't be any tariffs on Canada or Mexico."  

"If that [NAFTA] negotiation is unsuccessful then tariffs will be applied across the board," said Peter Navarro, the director of the White House National Trade Council to Fox News. "Now, importantly, in addition to that, there is language that will allow other countries to effectively propose ways that they could get a similar dispensation in exchange for more fair and reciprocal trade with the United States."

Nafta isn’t the only reason the U.S. is implementing these tariffs. China had the largest-ever annual trade surplus with the U.S. in 2017.  

“From Bush 1 to present, our Country has lost more than 55,000 factories, 6,000,000 manufacturing jobs and accumulated Trade Deficits of more than 12 Trillion Dollars. Last year we had a Trade Deficit of almost 800 Billion Dollars. Bad Policies & Leadership. Must WIN again! #MAGA,” tweeted Trump on Wednesday.

“You do see a theme in some of the upcoming decisions the president has to make,” said a White House economic official to Wall Street Journal. “You have Chinese industrial policy at its core.”

It appears as though that the Trump administration is ready to take a stricter stance on trade agreements with China after the country’s lack of action when it comes to North Korea.

 "I have been soft on China because the only thing more important to me than trade is war," said Trump to The New York Times last month. "If they're helping me with North Korea, I can look at trade a little bit differently, at least for a period of time." 

After the administration had discussed introducing harsher penalties on Chinese imports, like aluminum, steel, and solar equipment in the past, China threatened to take an "appropriate and necessary response" to these tariffs, which could ignite a trade war.  

China imports a large supply of U.S. soybeans, which could change in response to penalties.

The EU also has plans to impose import duties on peanut butter, bourbon, orange juice, steel, along with other industrial products.  

As part of Trump’s “America first” campaign, Trump is trying to improve the U.S. industrial industry by detouring companies from buying industrial products from overseas.  

"We will not place any new tax on products made in the United States. You don't want to pay a tax, bring your plants to the United States,” said Trump. "We're urging all companies to buy American. That's what we want. Buy American." 

But Trump made it clear that he is open to negotiations.  

"[We’re] sticking with 10 and 25 percent initially. I’ll have a right to go up or down, depending on the country,” said Trump. "We’re going to be very flexible.

Author’s note: Although Commerce Secretary Wilbur Ross said this order isn’t a negotiating technique, it totally is. Trump always takes a hard line and then lets people negotiate him down. He has said he is flexible to changing the tariffs based on other agreements. These new tariffs give the U.S. more negotiating power.

 


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