“By the time products get to the consumer, most of the cost is in labour and other materials and not the raw steel and aluminum. There will be some impact, but it won’t be that noticeable to your average consumer, nor will there be much effect on the U.S. production of steel and aluminum.” As claimed by Dickens, Distinguished Professor of Economics and Social Policy at Northeastern University, the import taxes Trump levied—25 percent tariffs on steel and 10 percent on aluminum, excluding imports from Canada and Mexico—“won’t have that great of an impact initially.”
The bigger risk, Dickens said, lays in what happens after these tariffs have been put in place. He opined, “If we get into a full-blown trade war with all our allies and China, we’re in for potentially big impacts on things that consumers really care about.” Such retaliatory measures could target specialised industries that export heavily to Europe, according to news reports. European Commission President Jean-Claude Juncker said last week that the European Union stands to impose tariffs on Harley-Davidson motorcycles (made in Speaker Paul Ryan’s home state of Wisconsin); on bourbon (from Senate Majority Leader Mitch McConnell’s home state of Kentucky); and on Levis or orange juice from Florida.
“These are products Europeans buy from us that would have very localised impacts on people,” Dickens said. Additionally, Dickens said he “fully expects” there will be a case taken to the World TradeOrganisation (WTO) against the U.S. for the tariffs, which were issued under a provision of trade law that allows the president to take broad action to defend American national security. He added, “I think a WTO case can be made that there is no reasonable defense purpose for this, which would give other nations the authority from the WTO to take retaliatory action against the U.S.”
Even in that case, Dickens said, it’s more likely the U.S. would simply be isolated from world trade than that a full-scale global trade war would emerge.
Harminder Singh