There's a trade war brewing in the White House—and President Trump will soon have to choose a side.
In January, Commerce Secretary Wilbur Ross recommended protectionist tariffs on steel and aluminum imports, the specifics of which were released on Friday: Ross wants Trump to place steep tariffs and quotas on the world's biggest dumpers of aluminum and steel—most notably, Brazil, China, Turkey, Russia, Venezuela, and Vietnam.
Axios quotes one anonymous “trade expert” as saying, “This would be beyond a trade war. You’re talking about blowing up the WTO [World Trade Organization].”
Robert Scott, a trade economist at the Economic Policy Institute who supports stronger trade restrictions, says such a comment is laughable. “Total U.S. steel and aluminum imports in 2017… made up less than 2 percent of total U.S. goods imports,” Scott said in an email. “If other members of the WTO want to throw out the whole deal over what amounts to a tiny share of total U.S. and world trade, then that is their problem.”
He added that a more useful response than knee-jerk alarmism about trade wars “would be to encourage other fair trading countries to join the U.S. in eliminating exports from unfairly trading nations that are the targets of these (possible) trade restrictions.”
Ross's proposal includes a 23.5 percent tariff on aluminum from China, Russia, Venezuela, and Vietnam (7.7 percent on other countries) and a minimum 53 percent tariff on steel from Brazil, China, Costa Rica, Egypt, India, Malaysia, Korea, Russia, South Africa, Thailand, Turkey, and Vietnam (24 percent on other countries). There would also be quotas on aluminum and steel imports, limiting countries to 2017 export levels or lower, depending on the country.
The issue of trade protectionism is fueling an internal war among Trump's top advisers. The so-called globalist wing, including Gary Cohn, Steven Mnuchin, Rex Tillerson, and James Mattis, are all vehemently opposed to imposing tariffs that they worry would spark a trade war that would upset global markets and aggravate diplomatic relations. The protectionist wing—including Ross and U.S. Trade Representative Robert Lighthizer—occupies a lonely island within the administration.
Under U.S. trade law, the president has 90 days after Ross's January recommendations to take some type of action. During the presidential campaign, Trump promised to crack down on Chinese trade manipulation—namely steel and aluminum dumping—and to restore U.S. industries, but as I reported in January, his administration has delayed and deferred action through his first year in office.
Trump, of course, notoriously flip-flops his positions based on the last person he spoke with, and it's unclear which way he is leaning. He has already shown a willingness to implement tariffs on washing machines and solar panels. The question is whether he would defy his top military, diplomatic, and economic advisers on such a critical issue.
This was the populist fight that Steve Bannon hoped for when he was still in the White House. Trump has until April to make a final decision. Until then, the White House's internal trade war is sure to intensify.
