The Winners And Losers Under Trump's Steel Tariff Plan
MICHEL MARTIN, HOST:
Let's hear more from David Wessel. He is the director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. That's a research institute here in Washington, D.C. He's also a longtime economics reporter and editor. And he's with us now. Good to have you back with us. Thanks for joining us.
DAVID WESSEL: You're welcome. Good to be - talk to you.
MARTIN: Well, you heard our conversation with Congressman Costello. I mean, is the debate about this as ambivalent as he was? I mean, is - are the - sort of the sides fairly evenly matched?
WESSEL: No, I don't think there's a lot of ambivalence. Although as the congressman points out, the president kind of blurted this out, and a lot does depend on the details. Will he, for instance, exempt steel from Canada, which doesn't seem like our greatest enemy in the world? Will there be exemptions for some kind of steel which we don't make in the United States? So it's very hard to tell exactly what the president is going to do. And I suspect there's a lot of maneuvering about it.
But basically the world is divided between people who think America's getting a raw deal on trade - and they like tariffs, and President Trump clearly has a number of supporters who think that - and other people - most economists, a lot of members of Congress - who are horrified that the president is starting a so-called trade war that'll end badly.
MARTIN: And who would be the - and I hate to put it so bluntly, but who would be the winners and losers here?
WESSEL: Well, in general, the winners should be the people who make steel and aluminum and the people who work for them. That's what this is meant to do. It's meant to protect them from imports, allow them to raise their prices. The losers would be pretty much everybody else. So for instance, if you look at the data, there's very few people - only about 140,000 - who make steel in the United States. There's 6 1/2 million people who work for companies that buy steel. So small number of winners, a lot of losers.
MARTIN: Why did the stock market react so negatively?
WESSEL: That's a great question. Basically steel and aluminum are a very small part of the American economy, so I don't think you can explain it - the tariffs on them. I think what the stock market is worried about is this is the beginning of a cascading series of very harsh measures on trade. The president has felt strongly about this. His staff has held him back until now. He makes a move.
The European Union is already talking about putting retaliatory taxes on U.S. exports of Harley-Davidson motorcycles, bourbon and blue jeans. And who knows what the Chinese and the Canadians will do? So I think the market's worried that this is the beginning of a series of adverse effects that'll hurt the U.S. economy and hurt U.S. businesses.
MARTIN: Well, President Trump tweeted earlier today, quote, "the United States has an $800 billion yearly trade deficit because of our" - quote, "very stupid," unquote - "trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more," exclamation point. End of tweet.
Well, let's just take out the - sort of the invective for a minute and just ask the question, is it a fact that there is an $800 billion trade deficit, and that this does contribute to, say, job loss in the United States, and that that's a worthy reason to consider a measure like this?
WESSEL: Most economists would argue that the point of trade is to benefit both parties - both the United States and China. The president seems to look at this as every time we win, they lose and vice versa. That's the fundamental disagreement here. But that's not to say that the president is wrong that there are some trade practices by other countries that do hurt American workers. And so the question really isn't, could we do a better job of protecting our workers from unfair trade practices? The question is, is this the right way to do it?
I mean, the president is trying to blow up agreements that the United States has struck with other countries to try and set rules for trade. The North American Free Trade Agreement, the agreement that created the World Trade Organization, the agreement to set up the Trans-Pacific trade partnership - all those things were designed to make the rules fair.
There's a lot of criticism of those rules, and they probably could be better. I don't think very many sober people think that slapping tariffs on steel and aluminum, which seems kind of like a 1950s kind of thing, is going to solve the problem.
MARTIN: Before we let you go, what are some of the things that you are going to be looking at and that other people like you who watch the economy closely are going to be looking at in the coming weeks to see what long-term effect this might have if, in fact, the president follows through on this threat?
WESSEL: One thing is the details. What exactly is it going to do? Two, what are other countries going to do? Are they going to laugh at the United States and say, you have a paper tiger as president and we're just going to sit by? Or do they start to fight back? And three, how do the Chinese handle it?
It's really interesting. The president is very angry at China and says they're not trading fairly. We import very little steel from China, so this won't hurt them. But it suggests - and I think he's using this as a negotiating tactic to say to the Chinese, I'm going to be different than all my predecessors. We'll see. Do they react by being more conciliatory? Or do they react saying, we can play that game, too?
MARTIN: That's David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution and Wall Street Journal contributor. David, thank you.
WESSEL: You're welcome.
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