On the 31st of May 2018, the republican President Donald Trump pressed forward to enact his planned tariffs on steel and aluminum. Of course the US stock market took a dive.
The market does not react well to the president’s mercurial decision making on this subject where he goes back and forth on whether to enact these sanctions or not. But this is one of his rare core beliefs even if wrong, and he did make this promise to his base at his rallies during the campaign season.
As I’ve mentioned in the past, US legislators have avoided this tactic at all costs because our past experience with the Smoot–Hawley Tariff inplemented in 1930 by the US Congress was an unmitigated disaster. As per Wikipedia, At first, the tariff seemed to be a success… (but then) US imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933), and exports decreased 61% from $5.4 billion to $2.1 billion. GNP fell from $103.1 billion in 1929 to $75.8 billion in 1931 and bottomed out at $55.6 billion in 1933. Imports from Europe decreased from a 1929 high of $1.3 billion to just $390 million during 1932, while US exports to Europe decreased from $2.3 billion in 1929 to $784 million in 1932. Overall, world trade decreased by some 66% between 1929 and 1934.
In May 1930, over a 1000 economists signed a letter addressed to the US Congress, advising about the likelihood of negative consequences if the US Congress passed its tariffs’ bill. That same scenario is playing out today. But the president needs to read his history.
The US Commerce Secretary Wilbur Ross claims that the imposition of the current planned tariffs will only effect the US economy by about 1%. One percent is a big deal when the US president and the GOP in the US Congress were counting on a minimum of 3% GDP growth in 2018 to support the 2017 GOP tax cuts bill. For the 1st quarter in 2018, the US GDP is only 2.2%.
Here is the rest of the story…
On May 31, 2018, Salvatore Nicholas of the Washington Press penned the following report, “Trump just declared a trade war against Canada. Trudeau’s response is brutal”
“President “Deals” continues to prove day after day that he knows nothing about making, well, deals. For proof, look no further than Thursday’s stock market dip after Trump placed 25% and 10% tariffs respectively on Canadian steel and aluminum.”
“As our neighbor to the north, Canada has long been an ally of the United States, but years of civility between the two nations is falling apart faster than Donald Trump’s toupee in the wind.”
“After Trump’s disastrous announcement, Canadian Prime Minister Justin Trudeau was forced to respond – and he did so by imposing his own $16.6 billion dollar tariffs on American goods.”
“Deals, deals, deals.”
“Trudeau took the podium today and spoke both in French and English, as he is oft to do when addressing his bilingual country. By contrast, Trump can barely get through one coherent sentence in English.”
“In closing, I want to be very clear on one thing,” Trudeau explained. “Americans remain our partners, our allies, and our friends. This is not about the American people,” he assured all who were listening.”
“It really says something when a foreign leader has more respect for a nation’s constituents than its actual leader.”
“Trudeau is aware of that as well, as he delivered one last epic burn before passing the mic to Minister of Foreign Affairs Chrystia Freeland.”
“We have to believe at some point common sense will prevail,” Trudeau hoped, “But we see no sign of that in this action today by the U.S. administration.”
If Trudeau can pull common sense out of Trump, it’s he who deserves a Nobel Peace Prize and maybe an Emmy (just to get under Trump’s skin).
Freeland began her speech in French as well, before switching to English so that even Trump could try to understand. Somehow, her words outdid Trudeau’s fiery speech.
“These tariffs are totally unacceptable,” she began, before delivering the bad news to American consumers:
“In response to these measures, Canada intends to impose tariffs against imports of steel, aluminum, and other products from the United States, representing the total value of 2017 Canadian exports affected by the US measures. That is $16.6 billion dollars. We are imposing dollar for dollar tariffs for every dollar levied against Canadians by the U.S.”
“Perfection, President Deals! Seems like “MAEA” should be his new slogan – Make America Expensive Again (not that it was cheap to begin with).”
“She continues, informing viewers that the United States has one month left before the changes take effect, effective as of July 1, 2018. She also made sure to warn Trump that, “[the tariffs] will remain in place until the US eliminates its trade-restrictive measures against Canada. Our steel and aluminum workers have our full support.”
“Eventually, Freeland brought up both the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), pointing out that Trump’s tariffs violate rules imposed by both, which will undoubtedly cause a headache for the American president ahead of the WTO summit this summer.”
“She finished up by laughing off the White House’s ridiculous assertion that the tariffs are in some way meant to bolster national security, as she points out that Canada has never been a threat to America.”
“I want Canadians to know that their government will always defend Canadian workers and Canadian businesses,” Freeland closes.
“Remember the days when the American president wasn’t a self-serving bigot who supported American interests while maintaining foreign diplomacy? It feels so foreign now.”
Link to entire article: Trump just declared a trade war against Canada. Trudeau’s response