Will Trump’s Trade Tariffs Save American Jobs or Cost American Jobs?

Cargo Ship
Photo by Sheila Fitzgerald / Shutterstock.com

President Donald Trump today announced he plans stiff new tariffs on imported steel and aluminum. The tariffs — essentially a tax — will add 25 percent to the cost of imported steel and 10 percent to the cost of imported aluminum. As of this writing, it’s unknown whether the tariffs will apply to select countries or all countries.

Tariffs are often used to retaliate against unfair trade practices by other countries. For example, the Chinese have long been accused of selling steel for less than cost on the world market, a practice known as “dumping” and intended to capture greater market share.

Trump campaigned heavily on protecting American jobs. He has said imposing tariffs on these imports would do that. A few days ago, the president said:

“I want to bring the steel industry back into our country. If that takes tariffs, let it take tariffs, OK? Maybe it will cost a little bit more, but we’ll have jobs.”

If American companies can buy Chinese steel for far lower prices than American steel, they will. That helps Chinese steel workers, but puts American steel workers out of a job. Taxing imports essentially pressures American companies to use American steel by making Chinese steel more expensive.

Here’s one of Trump’s tweets from March 1:

Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!

While that’s a sentiment hard to argue with, the stock market certainly doesn’t seem to like the idea. Shortly after his announcement, the stock market plunged more than 500 points.

Why? Here’s how one asset manager explained it to CNBC:

“That could really spook the market,” said Marc Chaikin, CEO of Chaikin Analytics. “The biggest wildcard would be a trade war and nobody should be excited for that.”

A double-edged sword

While protecting American jobs sounds like a great idea, trade is a bit more complicated than some in Washington are making it sound. For example, consider this recent comment made on Bloomberg by former Treasury Secretary Larry Summers.

What I can be pretty sure of is that because there are far more Americans who work using steel and aluminum than work producing steel and aluminum, an effort that is successful in protecting the American market and raising the prices of aluminum and steel is more likely to be a net job stealer than a net job creator.

This, in a nutshell, is the problem with protectionist trade practices. Raising the price of Chinese steel will force more American companies to use American steel, and that protects American steel workers. But raising the price of steel will also result in higher prices on products containing steel, from cars to toasters. As prices rise, we buy less stuff, which may cost the jobs of those making that stuff, and the economy more generally.

Another danger of tariffs is that they can ignite a trade war: “You tax our steel, we’ll tax your soybeans.” (We exported $21 billion of agricultural products to China in 2016.) So then what we’ve done is saved the job of a steel worker and lost the job of a soybean farmer, tractor salesman or dockworker.

Trade tensions over steel are not new; Accusations of steel dumping are among the most common among trade disputes taken up by the World Trade Organization. As the Los Angeles Times reports, it also won’t be the first time for a president to impose sanctions on steel imports:

[T]he last time a U.S. president imposed global steel sanctions was in March 2002 when President George W. Bush levied tariffs of up to 30% on various types of imported steel, making good on a campaign promise to aid beleaguered steel manufacturers and workers amid a surge of imports.

U.S. steel prices jumped nearly 70% by mid-summer, but months later the WTO ruled the action illegal and Europe threatened to retaliate with tariffs of its own, on Florida citrus, motorcycles made in Wisconsin, and other U.S. goods. Shortly afterward, Bush pulled the tariffs, 16 months earlier than the three-year period they were set to remain in effect.

In short, taxing imports saves American jobs, but it can also result in higher prices, costing American jobs. Another thing politicians forget to mention: Higher costs, especially labor costs, will accelerate the real American job killer: automation. The simple fact is that more and more jobs are being done by robots, a problem virtually ignored by most politicians. Apparently, it’s much easier to simply blame the Chinese than grapple with the complex issue of technological advances.

The bottom line

It’s easy to get applause by promising to save American jobs. But tariffs are a very blunt, and potentially dangerous, instrument.

What Trump and others have thus far failed to account for is the potential ripple effects from these policies. There are plenty of experts on both sides; there’s no answer that’s unassailable. The point? It’s more complicated than it appears.

What do you think of U.S. trade policies? Sound off below or on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
3 Bank Accounts With Perks for Customers Age 55 and Older
3 Bank Accounts With Perks for Customers Age 55 and Older

These checking accounts offer exclusive discounts and other perks — including interest — to older customers.

2-Minute Money Strategy: How Should I Invest My Retirement Savings?
2-Minute Money Strategy: How Should I Invest My Retirement Savings?

If retirement is on the horizon, you can’t afford to take too much risk, but you also need to make as much as possible. Here are your options.

3 Cable TV Companies Hiking Prices for 2020
3 Cable TV Companies Hiking Prices for 2020

Still married to your cable company? Hold on to your wallet!

8 Ways to Score an Extra Discount at Walmart
8 Ways to Score an Extra Discount at Walmart

Are you aware of all these ways to boost your savings in Walmart stores and at Walmart.com?

It’s Worth Paying More for These 7 Things
It’s Worth Paying More for These 7 Things

Sometimes, the difference in quality makes it worthwhile to open your wallet a little wider.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on these familiar purchases. Yes, even pregnancy tests.

13 Brilliant Bulk-Buy Items on Amazon
13 Brilliant Bulk-Buy Items on Amazon

Every household should have these products on hand. Buying them in bulk on Amazon saves you cash.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

8 Deep Discounts Available on Amazon This Friday
8 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

Homeowners Say These 2 Kitchen Appliance Brands Are Best
Homeowners Say These 2 Kitchen Appliance Brands Are Best

One brand takes five of the top honors, while another ranks highest in three categories.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

9 Indestructible Products That Are Worth the Price
9 Indestructible Products That Are Worth the Price

If you’re willing to pay a little more for these products, you may never have to shop for another again.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

8 Ways to Slash Your Internet Bill
8 Ways to Slash Your Internet Bill

No matter what price you are paying for internet service, taking these simple steps can lower it.

Americans Agree on These 3 Changes to Social Security
Americans Agree on These 3 Changes to Social Security

In an era of division, we are united about these changes to the Social Security system.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.