Brian Messing, Section Editor
President Trump announced on Thursday that he would impose tariffs on steel and aluminum imports. Trump’s specific plan called for a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports. The impacts of this policy will be wide-reaching and will affect most Americans.
President Trump has rejected the post-war consensus that free trade is superior to protectionism. America lowered tariffs and cooperated with her neighbors. America followed the principle of comparative advantage for decades and wealth was created. America did well under free trade policies during the second half of the twentieth century. The prices of consumer goods decreased substantially and opportunities were created for people seeking jobs in fields that America specialized in.
More recently, free trade has become a divisive issue in American politics. The 2016 election was unique in that it was the first time in over a century that both major candidates ran on a platform rejecting free trade. President Trump was notorious for claiming that free trade hurt working class communities in America. This became a staple of his “America First” campaign and an issue that he proved could be used to cross party lines. Additionally, Hillary Clinton came out and opposed the Trans Pacific Partnership (TPP), a free trade agreement between 12 nations, that she helped negotiate when she was Secretary of State. According to the World Bank, if TPP had gone into effect, it would have raised the GDP of member countries by an average of 1.1 percent by 2030, leading to greater wealth for Americans.
Support for free trade hit an all-time low in 2016, with only 45 percent of Americans supporting free trade agreements. This number increased in 2017 to 52 percent, bouncing back after the election campaign was over. Perhaps this shift away from free trade is a byproduct of being out of an election year.
Despite the increasingly favorable opinions on free trade in America in 2017, President Trump has held true to his campaign promise and called for tariffs last week. The reaction was mostly negative. The stock market plunged on Thursday, with the Dow closing over 400 points down in a reaction to the announcement about the tariffs. Wall Street’s fear is that by raising the price on steel and aluminum imports, companies that import steel and aluminum will be forced to pay more, assuming that they import the materials from foreign nations.
The tariff issue likely affects you in that prices for any goods that use steel or aluminum will increase. The cost of tariffs is not placed solely on corporations, but rather is passed onto the consumer through rising prices for consumer goods. Additionally, many economists have predicted that increased tariffs could lead to the United States entangling itself in trade wars with other nations. Reactions from Canada, Mexico and the European Union have already been negative. At a minimum, it is likely that these countries will raise tariffs on U.S. exports, further causing issues for Americans.