President Trump started a major conversation by saying that the USA could impose tariffs on steel and aluminum imports. It was not an official announcement of the imposition of these taxes, so it remains to be seen what will actually be done. It is, however, an important issue that needs discussion.
There are two possibilities that one can take just from what the President has said. (1) America could impose fixed import duties on all steel and aluminum brought into the country from abroad. (2) America could impose import duties on these products equivalent to the tax and regulatory obstacles that other countries impose on US made products. In other words, if China imposes restrictions on American products, then the US could place import duties on the Chinese products.
The difference between the two possibilities is major. The first is construction of a protectionist wall. It ends the need for American companies to compete with their global counterparts. It is something that could help the aluminum and steel industries in the short term, but it would also lead to a misallocation of resources in the longer term. It would be a mistake. The second possibility is actually a push towards FAIR free trade. There is no reason for the USA to let our companies be limited in their foreign endeavors while the companies of the countries that put those limits on ours get to sell in the USA free of comparable restrictions. Free trade is supposed to reward great efficiency in production not greater agility in creating obstacles to a country's domestic market. Forcing the opening of the markets of other countries is a good thing. President Trump would do well to move down that path.
There are two possibilities that one can take just from what the President has said. (1) America could impose fixed import duties on all steel and aluminum brought into the country from abroad. (2) America could impose import duties on these products equivalent to the tax and regulatory obstacles that other countries impose on US made products. In other words, if China imposes restrictions on American products, then the US could place import duties on the Chinese products.
The difference between the two possibilities is major. The first is construction of a protectionist wall. It ends the need for American companies to compete with their global counterparts. It is something that could help the aluminum and steel industries in the short term, but it would also lead to a misallocation of resources in the longer term. It would be a mistake. The second possibility is actually a push towards FAIR free trade. There is no reason for the USA to let our companies be limited in their foreign endeavors while the companies of the countries that put those limits on ours get to sell in the USA free of comparable restrictions. Free trade is supposed to reward great efficiency in production not greater agility in creating obstacles to a country's domestic market. Forcing the opening of the markets of other countries is a good thing. President Trump would do well to move down that path.
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