Trump’s Steel Tariffs Start Cascade of Downstream Pain
Have backfired in a spectacular way
More expensive inputs made US steel-users less competitive and put them in trouble, which forced them to reduce orders, so the steelmakers were actually harmed by tariffs supposedly enacted to protect them. Or as economists figured out a long time ago every intervention in the market distorts it and necessitates yet further intervention.
Related:
- Trump’s Trade Policies Have Been All Pain, No Gain
- US Steel Down 70 Percent: How Trump Tariffs Ended up Hurting American Steelmakers
On Jan 24, Trump issued a proclamation on further steel and aluminum tariffs because the initial tariffs backfired.
Cascading Protection
Trump’s steel & aluminum tariffs have raised input costs, making US companies that rely on the metals less competitive.
Now he is expanding his tariffs to shield the metal-using products from competition.
Where will it end?
By @AnaSwanson & @uwsgeezerhttps://t.co/cQ182K54cv
— Chad P. Bown (@ChadBown) January 27, 2020
With little fanfare or reporting, Trump issued a Proclamation Adjusting Imports of Steel and Aluminum Products.
I picked this story up courtesy of a Tweet Thread by Chad P. Bown.
On Friday night, Trump admitted that US companies whose costs he has raised – by imposing tariffs on the metals they need – are no longer competitive with foreign firms. Because of his policies, they too must now be shielded from trade…
Trump announced he was expanding the product coverage of his national security tariffs on STEEL and ALUMINUM to include “derivative” goods that use steel and aluminum as an input – eg, steel nails or aluminum bumpers.
Imports of those “derivative” products have increased, in part because US companies have had their COSTS go up because of Trump’s tariffs on steel and aluminum. In Econ 101 terms, the cost increase shifts the US supply curve (DS) to the LEFT. That makes imports INCREASE.
Economists call this “cascading protection.” Trump’s tariffs on inputs lead to higher costs for US companies making the downstream products, and this results in a clamoring for ADDITIONAL trade protection for those products. This was all completely predictable.
Results Speak For Themselves
- GDP Internals show business investment contraction: Ignore the Headline, Real GDP is Much Worse Than It Looks
- How to Buy an Election – Durable goods orders excluding defense were -2.5%: Of Durable Goods Orders (and How to Buy an Election)
- Freight shipments collapse: Cass Year-Over-Year Freight Index Sinks to a 12-Year Low
Cheerleader Silliness
Meanwhile, people cheer Trump for shrinking imports. That was the biggest boost to 4th-quarter GDP.
However, were it not for huge government spending and absurd measures of inflation, it would be clear there is nothing to cheer about. GDP would have been 0.22% (see link number 1).
And by the way, imports always decline in recessions.
Addendum – Updates From Chad Bown
3/
Economists call Trump's new tariffs "cascading protection."
Trump's original tariffs on metal inputs raise costs for US companies. They then struggle to compete with foreign firms.
Trump's answer is to provide a SECOND ROUND of tariffs, so the protection snowballs… pic.twitter.com/Z7nEsiTsde
— Chad P. Bown (@ChadBown) February 4, 2020
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Now, in Trump terms, tariffs on $450 million of imports is not much.
But new data reveals A LOT more of that "cascading protection" is arising under OTHER US tariff laws.
For steel and aluminum using products, $5 billion of OTHER imported products face new US tariffs!!! pic.twitter.com/wAVXEyTQKX
— Chad P. Bown (@ChadBown) February 4, 2020
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There are other worrying bits of Trump's new "national security" tariffs, as announced Jan 24:
• the lack of transparency and possibility for corruption
• the suddenness of the policy, its costs and uncertainty
• they could undermine Trump’s other deals (eg, US-Japan) pic.twitter.com/n9fzy3rZKM— Chad P. Bown (@ChadBown) February 4, 2020
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Have a read and let me know what you think. (ENDS)https://t.co/mrGHuXy4tH
— Chad P. Bown (@ChadBown) February 4, 2020
Source: Mish Talk
It’s past time to give this guy in the white house the boot! He and his gang have been undermining all government agencies – and is going after corporations now too…he is like the proverbial bull in the china closet – except he is just an overweight lowlife..bulls are much better animals than this overloaded piece.
Interesting side-note.
Trump is just such a brilliant leader in economic and trade affairs.
And of course, we have the piece below about renewed monetization of debt.
And this half-crazed televangelist, playing the statesman, is looking for some big tax cut to pump more hot air into the economy before the election.
all tried and proven, don’t be confused about his goal
– playing to a rigged stock market, unbelieveable