Is the US Administration Risking a Trade War?

Because steel and aluminum imports threaten security, U.S. President Donald Trump unveiled his plan to put tariffs on both of the goods, 25 percent and 10 percent, respectively.

This disturbs the trade system, which is based on rules and is an extremely dangerous decision concerning trade war. It also is worrisome in that it has a negative influence on world economics, which had been on an upward trend. I strongly wish that there would be a repeal of this tariff decision.

This plan is based on the 1962 Trade Expansion Act, section 232, allowing trade restrictions for the purpose of security. However, the opinion that increased imports negatively affect U.S. security is rare. It is safe to assume that this is actually a protective measure to gain support from domestic traders.

Next week when the particulars are announced, we will see clearly, but it seems that the range of target countries for high tariffs will be far-reaching. Countries such as members of the European Union and Canada have already announced a plan to take opposition measures if the tariffs are raised.

U.S. manufacturers who use steel and aluminum as raw materials are, of course, also strongly opposed. It raises production costs in the U.S. manufacturing industry, passes the price burden onto consumers, and the U.S. economy will also take a hit.

In the Trump administration, criticism of China’s economic and trade policy is said to be intensifying. Issues such as requests for technology transfers as a matter of routine for enterprises investing in China, intellectual property rights infringement, and subsidies for state-owned enterprises including steel manufacturers are certainly problems.

In response to such unfair action by China, it would be effective for Japan, the U.S. and Europe to collectively request a change of course. Concerning the steel problem, a multilateral minister-level meeting was scheduled with the intention to eliminate conduct, such as subsidies, that distort competition, and there have been repeated discussions.

Putting high tariffs on steel only throws into disarray international unity on the issue of urging China to reconsider its unfair habits. Those with a high share of exports to the U.S., such as Canada and Brazil, far surpass China’s share of exports.

During the 2016 election campaign, President Trump achieved success by complaining about the changes in traditional U.S. trade policies which had placed emphasis on free trade.

However, last year, aside from withdrawing from the Trans-Pacific Partnership and initiating renegotiations of the North American Free Trade Agreement, Trump restrained himself from making extreme decisions that would throw the trade system out of order.

The tariff decision may be the first step toward the U.S. administration’s full-scale, self-protective change in policy. If such is the case, it should be an extremely worrisome situation for the world.