Protectionism trade deficit by country
Check out our H2 hedge fund letters here. Following a trade investigation of imports, U. Department of Commerce recently recommended imposing heavy tariffs or quotas on foreign producers of steel and aluminum in the interest of national security.
Armed with steel and aluminum reports, Commerce Secretary Wilbur Ross stated protectionism trade deficit by country steel is vital to U. Ross urged President Trump to take immediate action by adjusting the level of imports through quotas or tariffs.
Trump is likely to invoke the Section of the Trade Act, which allows the president to impose tariffs without congressional approval. He must respond to the reports by April 11 and protectionism trade deficit by country for steel and aluminum, respectively. China, the main target of the proposals though a minor steel importer in the U. The proposed policy instruments suggest that the Trump administration is willing to subsidize American steel and aluminum, even at the expense of far bigger and more consequential U.
While the proposed measures extend from broad adjustments that involve many countries to targeted adjustments that focus on a few countries, the rationale of the suggested figures is fuzzy and ultimately undermined by geopolitical considerations. In steel industries, the Commerce Department recommends that the U. Another option would be a tariff of 53 percent on all steel imports from 12 countries none are advanced economies, except for South Koreawith a quota on steel imports from all other countries equal to percent of their exports to the U.
In aluminum, the Commerce Department recommends a 7. The second option is a A third option would be an aluminum import quota on all countries of Nevertheless, President Trump is given substantial geopolitical leeway. He could have specific countries exempted from the proposed quota, based on U. In contrast, President Trump protectionism trade deficit by country exploiting the seldom-used Section of the Act to increase trade barriers, in order to undermine or reverse 50 years of trade progress in just a few years.
In his campaign, Trump targeted those economies with which America has the largest aggregate trade deficit.
In order to legitimize a trade offense, which has a highly questionable legal basis, he is starting protectionism trade deficit by country focusing on steel, but is expanding to aluminum. The proposed measures are just means to that final goal. The top 10 source countries for steel imports represent 78 percent of the total steel import volume. Although China has a key role in the proposed tariffs and quotas, it is not even among the top-steel importers in the U.
If the White House would target its tariffs and quotas proportionately, it should protectionism trade deficit by country hardest its North American Free Trade NAFTA allies and trade partners in Asia, which together account for a half of all steel imports. Like in steel, Canada is the leading source of aluminum imports into the U. Imports from China amounted to only half of that, a slight decline from levels, while the Commerce Department argues imports from China were significantly up Figure b.
What are the economic realities of the U. These are the countries that Trump is really after Figure c. In order to achieve that objective, the White House seems to be willing to risk its economic and strategic cooperation with China, undermine ties with its NAFTA partners, alienate its European North American Treaty Organization NATO allies and undercut alliances with the rest of its trade and security partners in Asia.
The record to date is distressing. Recently, the Trump administration announced tariffs on imported solar cells and modules, which protects a small number of U.
China has already retaliated. In turn, Trump is likely to resort to Section of the Trade Act of to unilaterally seek remedies for unfair Chinese trade practices, which will risk Chinese retaliation and a tit-for-tat trade war, just as the Tariff Act of did with dark consequences.
Such moves risk undermining not just international trade but the very institutions -trade-dispute resolution mechanisms — that support it. Amid the world trade collapse inJagdish Bhagwati published his Termites in the Trading Systemwhich demonstrated how preferential agreements undermine free trade. Since the end of the Cold War, both Republican and Democratic leaders have moved toward such pacts.
Untilthose moves were gradual and occurred with one pact at a time, however. In the Trump era, the shift is disruptive and multilateral. Today, the international trading system is not threatened by little termites nibbling away walls, but a huge stealth termite — new protectionism — munching away the very foundations of world trade.
Steel and aluminum overcapacity crises are multilateral and have global repercussions, not bilateral as the U. After the Cold War, the U. Today, the corresponding figure is about the same. Moreover, research indicates that U.
Second, since China continues to support world trade and investment, its role is vital in global growth prospects. And as s industrialization will intensify in India and other emerging economies, so will their need for steel, protectionism trade deficit by country and other commodities. Rapid economic development that supports global growth prospects should not be penalized. Third, through the Silk Road initiatives OBORChinese overcapacity can serve industrialization in emerging economies that participate in these initiatives, which also offer opportunities to advanced economies.
Dan Steinbock is an internationally recognized strategist of the protectionism trade deficit by country world and the founder of Difference Group. For more, see https: In effect, Trump is trying to use the Trade Expansion Act for trade contraction. Broadening the scope of new protectionism In his campaign, Trump targeted those economies with which America has the protectionism trade deficit by country aggregate trade deficit. Time to apply the right lessons Amid the world trade collapse inJagdish Bhagwati published his Termites in the Trading Systemwhich demonstrated how preferential agreements undermine protectionism trade deficit by country trade.
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