Could Trump’s Tariffs Spark A Trade War?

tariffsPresident Donald Trump has moved forward with new tariffs on imported metals, despite negative reactions from Republican lawmakers and manufacturers. However, he has reserved the right to make changes to the tariffs moving forward on a country-by-country basis.

Canada and Mexico will be at least temporarily exempted from Trump’s 10% tariff on imported aluminum and a 25% tariff on imported steel as NAFTA negotiations continue, and other allies could see reduced tariffs, according to Trump.

While the current trade balance may not be favorable to the U.S., updating existing trade agreements could help fix that imbalance without inviting a trade war of retaliatory tariffs or boosting prices for consumers.

“A trade war is not a productive path, so what has been proposed requires substantial revision,” Jeffrey Sonnenfeld, Senior Associate Dean for Leadership Studies at the Yale School of Management told Chief Executive. “At the same time, there are some profound asymmetries which have been unfair to the U.S. and much of the west from China, and with unequal terms with Europe in key products. As with NAFTA, updating, rather than open war, is the way to go.”

“[Tariffs] are going to invite retaliation from our trading partners and allies, and they’re going to erase much of the benefit of tax reform.” – Global Automakers CEO John Bozzella

Lawmakers including House Speaker Paul Ryan have raised concerns over the tariffs, and are worried they could have a negative impact on the economic gains provided by the recent tax reform law.

U.S. manufacturers have also spoken out against the plan, including the automotive and beverage industry, which could be heavily impacted by tariffs.

Global Automakers CEO John Bozzella told Fox News that he is “very concerned” about the tariffs and what it will mean for auto prices and consumers.

“These tariffs will raise prices on American consumers for cars and trucks that are actually built in America,” Bozzella said. “They’re going to invite retaliation from our trading partners and allies, and they’re going to erase much of the benefit of tax reform. Tax reform benefits that would have been used to invest in plants and equipment now are going to be used to pay for higher steel and aluminum [costs].”

United Steelworkers International has shown strong support for the tariff plan.

“For the USW, the objective has always been to restore market-based economics that ensure that our domestic producers can achieve a fair return as they invest in facilities, equipment and people, and contribute to the strength of our nation,” United Steelworkers International President Leo W. Gerard said in a statement. “The objective should also be to reduce the negative impact of steel and aluminum imports that have decimated production in the United States. The tariff levels the President announced will help to achieve that objective.”

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