Don't Be Fooled by Trump's Tariffs

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Trump has also tweeted a trade war is easily winnable.

The tariffs are 25 percent on steel imports and 10 percent on aluminum. A good example can be found in the sugar industry.

There's also the danger that making metals more expensive will hurt a lot more USA manufacturers than it helps. That would hurt producers but boost profits of construction and other industries in Southeast Asia. US Speaker of the House Paul Ryan is "extremely anxious about the consequences of a trade war", because it could undermine economic gains introduced by the new tax reform law.

It will also harm U.S. exporters. Again, should the trend following imposition of Section 232 tariffs mimic that of the trend seen with the Section 201 tariffs before, this would imply that U.S. Steel's current 8.6 EV/EBITDA ratio will shrink over time, and its stock decline in price. A lot of others use aluminum.

The announcement of duties of 25 percent on imported steel and 10 percent on aluminium has stung the European Union, coming as a surprise to U.S. allies and to many in Washington.

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While the tariffs have been introduced under the pretext of national security concerns, UK Steel claims only around three per cent of steel in the US is used for defence, and many see the move as politically motivated (a congressional seat in Pittsburgh, home to US Steel, is now up for grabs).

However, it is unlikely that the Trump administration will accept this proposal.

Shortly after Trump took office, the Information Technology & Innovation Foundation (ITIF), a U.S. technology think tank whose board includes representatives from top companies such as Apple, Amazon, Cisco, Google, and Intel, called for coordinated worldwide pressure on Beijing. That's bad news for restaurants and fans of steaks and hamburgers, who will pay those higher prices. "Also a fraction of what it once was", Trump said March 6, two days before the tariffs were officially signed. The move would punish Chinese tech companies for having U.S. companies give up their technology secrets in order to operate in China.

The reason is technology. So while some mills close, bigger rivals step up production and could become even more formidable global competitors.

Increased productivity means today's steel mills don't need as many workers. Tariffs won't change that equation. That is the case with the uneven tariff situation with other nations, and quite a few of them are our allies.

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While the tariffs on steel and aluminium, announced last week by Trump, are viewed as relatively insignificant in terms of imports and exports, moves to target China directly risk a direct and harsh response from Beijing. He will be removing jobs: while the American steel industry employees 140,000 people, its steel-consuming industry employs 6.5M. With the possibility of an exemption in mind, South Korean trade authorities will once again stress that Korean companies' investment in the USA can contribute to the American economy and that Korean steel exports do not affect the U.S.' security and economy negatively.

Li's comments regarding further production curbs is interesting. though, saying the steelmaking hub of Tangshan in Hebei province will extend production restrictions for another eight months after current curbs expire next week, according to the Reuters report.

China runs a $375 billion trade surplus with the United States and when President Xi Jinping's top economic advisor visited Washington recently, the administration pressed him to come up with a way of reducing that number. Government assistance violates the rules of the market, raising economic and justice concerns.

Do the math. While imported steel will cost more, imports will drop from one-third to one-fifth of all steel used here.

Trump will also have to shoulder the potential diplomatic backlash, as numerous US's allies, targeted by the tariffs, have expressed "deep concerns" by the disturbing trend of protectionism. No one knows if President Trump's tariffs will spark a trade war, but wars nearly always injure many innocent parties.

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