Mary SciannaClick image to enlarge

 by Mary Scianna

Countries implement tariffs on imports to protect domestic interests.

In many cases, the tariffs are reasonable, but US President Donald Trump’s plan to implement tariffs on steel and aluminum imports is misguided and wrong. Not because it will hurt the Canadian industry–although it will have an adverse effect on our economy–but because it will also hurt the industry the Trump administration wants to protect; the US steel and aluminum consuming manufacturing sector in that country. 

At the time of publication, the US had announced Canada would receive an exemption “for now,” which would be predicated on how discussions with NAFTA progressed with the two countries.

According to recent reports, the tariffs would increase US employment in that country’s steel and non-ferrous metals sector by more than 33,000 jobs, but it would cost close to 180,000 jobs throughout the rest of the economy or a net lost of close to 146,000.

Trump has announced a 25 per cent tariff on steel imports into the country and a 10 per cent tariff on imported aluminum. 

Canada is a top supplier to the US for both materials with $15 billion in sales for a variety of parts that go into goods manufactured in the US from cars to US military gear.

“The tariffs will lead to the US once again becoming an island of high steel prices resulting in our customers simply importing the finished part,” states the National Tooling and Machining Association and the Precision Metalforming Association. “The lost business to overseas competitors will threaten thousands of jobs across the United States in the steel consuming manufacturing sector, similar to our experience in 2002 when the US last imposed tariffs on steel imports [of up to 30 per cent that resulted in the loss of 200,000 American jobs].” 

The move is likely to trigger a trade war, and trade wars, according to many industry experts, do not benefit anyone. According to a Bloomberg business report on March 2, 2018, the steep tariffs on the US’ allies and trading partners, including Canada, is a “reckless approach to trade” that will result in retaliatory measures by other countries. Indeed, Canada, Mexico and the European Union have already made statements indicating there would be retaliatory counter-tariffs.

And while the move could hurt thousands of small and medium sized manufacturers in the US who rely on steel and aluminum imports and would find it difficult to absorb the higher costs of domestic supply, “the real risk isn’t that steel and aluminum are a bit more expensive, though that is likely to be the case. It’s that an entire system of global trade, which the United States helped build, might be undermined,” writes Neal Irwin in the New York Times.

Every country has the right to protect and secure the growth of its economy and while Trump’s intentions are understandable, the best approach to fostering the economic health of a country is through free and fair trade, not tariffs. SMT

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