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.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Social Security Blunders That Can Ruin Your Retirement
7 Social Security Blunders That Can Ruin Your Retirement

Making even one of these mistakes can easily cost you tens of thousands of dollars.

If My Spouse Dies, Can I Get Her Social Security?
If My Spouse Dies, Can I Get Her Social Security?

If a spouse dies, will the survivor collect the other’s share in addition to his or her own?

11 Home Upgrades With the Best Payback in 2020
11 Home Upgrades With the Best Payback in 2020

The home remodeling projects that deliver the best bang for the buck tend to have one thing in common.

17 Surprising Things You Can Clean in a Dishwasher
17 Surprising Things You Can Clean in a Dishwasher

It’s often easier and faster to put these household items in the dishwasher than to clean them by hand.

12 Expenses You May Be Tempted to Claim as Tax Deductions — but Shouldn’t
12 Expenses You May Be Tempted to Claim as Tax Deductions — but Shouldn’t

Thinking of trying to deduct a few of these things on your federal tax return? That could be a costly mistake.

View this page without ads

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

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

10 Cars You Are Most Likely to Keep for 15 Years
10 Cars You Are Most Likely to Keep for 15 Years

The cars that owners hold onto the longest have one thing in common, a new study shows.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

9 Things You Should Never Leave in a Car
9 Things You Should Never Leave in a Car

Thinking of leaving these possessions in a car? Prepare for unexpected consequences.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

9 Mistakes People Make When Cleaning With Vinegar
9 Mistakes People Make When Cleaning With Vinegar

Cleaning with vinegar can save you a lot of money, but using it like this can cost you.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

10 Things Successful Retirees Do Differently
10 Things Successful Retirees Do Differently

These habits and characteristics can help put you on the track to success.

7 Costly Health Problems That Strike After Age 50
7 Costly Health Problems That Strike After Age 50

As we age, our bodies wear down. Here is how to cut costs associated with some common ailments.

Will You Owe Taxes on Last Year’s Stimulus Payments?
Will You Owe Taxes on Last Year’s Stimulus Payments?

It’s the question on everyone’s lips this tax season.

29 Purchases That Can Save You Money Every Day
29 Purchases That Can Save You Money Every Day

Sometimes, you’ve got to spend to save.

7 Things I Never Buy at Costco
7 Things I Never Buy at Costco

A bulk buy isn’t always the best buy.

5 Tax Mistakes to Avoid in Retirement
5 Tax Mistakes to Avoid in Retirement

Even great savers can reduce their retirement income by making these mistakes.

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.