China runs a US$375 billion trade surplus with the United States and when President Xi Jinping's top economic adviser visited Washington recently, the administration pressed him to come up with a way of reducing that number.
The assumption behind this drastic restructuring of Canada's political economy was that America would keep its word - that it would grant special status to Canada (and to Mexico when that country joined what is now called the North American Free Trade Agreement).
"We expect the impact on USA growth and inflation to be fairly limited", said Mikael Olai Milhoj, a senior analyst at Danske Bank in Copenhagen. "If you plan for the worst -if you can live with the worst - the good will always take care of itself", he said. "It's very, very tough". US aluminum jobs have been mostly lost to places with cheaper electricity (i.e., Iceland, which is coincidentally also not China). The country's beef producers will be much better off because now imported meat is as much as 20 percent more expensive, meaning domestic companies will be able to sell more rib-eyes and raise their prices.
China accounts for roughly half of the $800 billion American trade deficit in goods. In contrast, Chinese steel comprises just 2% of all American steel imports.
For one thing, Vertical notes that the list of countries and products being exempted from the tariffs is "growing". However, China did cut tariffs on a few minor items last November.
Trump makes a strong case that many of our trading partners - most notably, China - are violating trade-agreement rules left and right and stealing American patents and intellectual property.
Canada is the United States' largest foreign provider of steel and aluminum, with about 85 per cent of Canadian exports being directed to that country.
This strategic free trade stance is created to monetize the advantage that America has as a result of having the largest and most lucrative consumer market. The Times concludes, "It's a problem that the Trump administration needs to address - and soon". For 30 years, American steel production has stayed about the same. When the new tariff is implemented, South Korean steel exports to the USA, which already fell a whopping 38 percent in 2017 from three years earlier, will face even more difficulties.
The steel and aluminum tariffs won't have a major effect on Europe, which isn't a major source of either for the U.S. But along with Trump's threat to impose a 35 percent tax on European automobile imports, the tariffs have managed to provoke a retaliatory EU response.
That would have negative consequences for American consumers and producers alike, as well as for the USA economy. Or, do we try to fix the situation. A higher price for one good means less money to buy other goods, which is not the formula for prosperity that Trump has espoused. This, of course, has attracted quite a lot of negative reaction. This is the exact opposite of the increased worldwide manufacturing prowess that Trump has promised. Instead of instantly denigrating and ridiculing Trump, do a little work and see what he is really doing below the surface.
Way back in 1987, Trump wrote The Art of the Deal about how to be a winning negotiator and business dealmaker.
The European Union threatened to retaliate against Trump's metals tariffs by targeting Harleys produced in House Speaker Paul Ryan's Wisconsin and bourbon in Senate Majority Leader Mitch McConnell's Kentucky. Ultimately, the conclusion of this exercise will usually be more moderate than the initial proposal, and actually will provide positive change for our country.