US moves to tax major commodity imports

United States president, Donald Trump, has announce and signed into action a tariff plan that would apply to steel (25%) and aluminum (10%) imports to the US. Currently there are options for exemption the prime candidates being Mexico and Canada who are both already upset due to Trumps determination to renegotiate the terms of NAFTA. The president claims to be taking protective measures “vital to [our] national security”, but it would also seem that it’s a leverage move to renegotiate NAFTA.

 

To no surprise this has left the global economic community in a fury with many countries to considering implementing duties on imports of US products. This is yet to be confirmed, mainly because much of the EU, similar to China, has higher duties on US products, then the US has on European products. Simply put the have more to lose should there be an economic confrontation. Harvard professor of economics believes that the EU will most like negotiate to decrease duties on US products to be exempt them from the duties on Aluminum and Steel.

 

Many speculators predict that the true target of the duty is China, who has traditionally utilized high tariffs on US products to ensure the security of local companies and manufacturers. For large industries, Chinese policy goes as far as to deny entry to market without a joint venture between a local organization and the foreign enterprise. Elon Musk is a great advocate of the duty because of this very reason. Sources say that if this duty goes into effect China would no longer be able to export subsidized steel to the US and accelerate the reduction of excess capacity as previously agreed by the PRC.

 

As of now there are nearly 10 days until the Donald Trump’s new policy goes into effect. With much of the country behind him there is also a strong change that he will not back out of this decision. It will take some time to see the effects if the duties, but it will surely effect the global market, and potentially retaliatory consequences. If the policy does leads to more aggressive economic policies for other countries then it really depends who has more to lose, and who’s willing to bear that cost.

2017 US Steel Imports (in billions)

$1.96

from China

$29.1

Globally