Trump’s Metal Tariffs

President Trump announced tariffs on steel and aluminum exports, leaving the global markets in shock yesterday.

Technical Analysis
02 Mac 2018
Trump’s Metal Tariffs

The markets are still reeling from a hasty announcement yesterday by President Donald Trump that as of next week they will be imposing tariffs on metal imports into the United States. The news is quite controversial and has sparked debates all over the world.

According to President Trump, the US government plans to implement a 25% tariff on steel and 10% on aluminum imports, a policy that is currently being developed by his administration and we are expected to see as soon as next week. Trump reasoned that with these new tariffs the United States will be better positioned to produce its own steel and aluminum, reinvigorating the metal industry of the US.

The announcement faced with a lot of criticism. Apparently, even advisors close to President Trump are not supportive of the bill, or at least recommend exempting the US’s closest trading partners from the proposed tariffs in order not to harm the international relations between these countries.

The stock markets reacted particularly negatively, with the Dow Jones dropping a full 500 points since yesterday. People within the manufacturing industry in the United States were also critical of the proposal, voicing a concern that this would raise their production costs, leading to job and wage cuts (in fact, the opposite of what Trump claims he wants to achieve).

This move is an example of a protectionist policy – something that was at the core of Trump’s election campaign that he is finally able to enact. However, the issue of tariffs has been discussed in the White House for months, leading nowhere. Chief important members of the government such as Treasury Secretary Steve Mnuchin, Defense Secretary James Mattis, and national security adviser H.R. McMaster are against the policy, while Trump’s trade advisors support it. It was widely unexpected that the President would call a snap press conference and make such a hasty announcement when the government is so split over the issue.

The NY Federal Reserve Chief Dudley also spoke against the measures, stating they could lead to an international trade war, forcing other countries to impose their own tariffs on US products and materials in turn. He warned that the tariffs would actually make manufacturing in the United States more difficult and could have a detrimental effect on the US economy.

Earlier today President Trump tweeted back that he actually welcomes trade wars and finds them “easy to win.” Since the main entities that would be affected by this policy are China, Canada, and the European Union, it is no surprise that together with the American stock markets drops were also registered today on the Frankfurt, Paris, London, and Hong Kong stock exchanges. With over $5.5 billion in 2017, Canada is the biggest exporter of steel to the United States. It is also number one in aluminum exports to the US, followed by China.

Economists are worried first because this might complicate many countries’ dealings with the United States, and secondly as this might serve as an example, prompting more and more countries to enter into trade conflicts with each other.

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