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Economists Say Tariffs May Trigger Trade War

Steel and aluminum tariffs will hurt many manufacturers. But the value of imports covered by the duties is only $10.8 billion, a pinprick for a $19.5 trillion economy.

This story by Eric Kulisch originally appeared in Automotive News.

The real danger, economists and business groups said, is the cumulative effect of several pending tariffs and the risk that they will instigate a full-blown trade war or trigger the demise of NAFTA. Chief among them is President Donald Trump’s threat to slap a 25 percent tariff on auto imports and car parts on national security grounds.

There is little basis for such a threat. The domestic auto sector is booming and didn’t seek relief from imports.

But it can’t be dismissed as political theater or a way to pressure trading partners for concessions.

Until now, the Trump administration’s aggressive proposals and bullying to correct trade imbalances were followed by horse-trading or backtracking to more modest outcomes, reflecting discord among White House factions feuding for control over trade issues.

There’s little of that discord left. Trade and foreign-policy hawks such as Commerce Secretary Wilbur Ross and National Security Adviser John Bolton have gained the upper hand. The threatened steel and aluminum tariffs on major allies are now a reality, the U.S. just reinstated sanctions on companies that do business with Iran, a potential exit from NAFTA seems more likely and new tariffs on Chinese imports are soon expected.

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