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Problems with tariffs

Tariffs on aluminum and steel were recently imposed on imports to the United States. A tariff is a tax--and taxes raise prices. Theoretically, this would mean that aluminum and steel produced in the United States might be available at a cheaper price, which might create a higher demand for these domestically produced resources.


The tariffs are controversial. The first to object were major allies and trading partners, Canada and Mexico. In the final legislation, these countries were exempted from the 25% steel and 10% aluminum tariffs. Other countries may also object to the tariffs, and those countries can bring their complaints to a panel of judges at the World Trade Organization (WTO).  (The WTO ruled Bush's steel tariffs of 2003 illegal.) But tariffs may be allowed by the WTO if "national security is at stake." Trump claims that the loss of 4.6 manufacturing jobs since 2000 is tantamount to a loss of national security. Nevertheless, since Canada, an ally, is a major supplier of steel, others argue that national security claims are not valid.


The tariffs also face opposition on the home front. Jeff Flake, Republican senator from Arizona, is introducing legislation to repeal the tariffs, but this may face an uphill battle for many reasons. 


The central question remains: Will these tariffs bring back American jobs? 

  • YES, according to Tim Timkin, a steel company CEO
  • NO, according to Fortune magazine--the tariffs will cause jobs to be lost.
  • NO, according several economists in a New York Times article

Sources: "Are Trump's Tariffs Legal?" by Patrick Gillespie, CNN Money, March 9, 2018. [Video: Fox News]

Follow up

  • What arguments suggest that tariffs will increase U.S. jobs? What arguments suggest that jobs will be lost due to the tariffs? What makes sense to you?
  • How does the idea of a tariff contradict the idea of capitalism? In what type of economic and/or political system does the idea of a tariff fit? (read the NYT article linked above)
  • Who are the obvious beneficiaries of the steel and aluminum tariffs recently imposed? Who may be the less obvious beneficiaries?  Who will be hurt?