Steel and Aluminum Tariffs

One complaint about Trump's steel and aluminum tariffs is that they hit all counties, including allies. But this misses the point of the tariffs: they aren't retaliatory, they are designed to protect a strategic sector for national security.

Alliance for American Manufacturing: An Aluminum Factory Keeps a Kentucky Town Afloat — and Keeps America Safe
The Century Aluminum plant in Hawesville is one of just five primary aluminum smelters remaining in the United States. It is the only one, however, with the capacity to make the high-purity aluminum needed by the U.S. military to build fighter jets like the F-35.
Tariffs on Canada are probably not needed. Tariffs on the UK and Australia also wouldn't make sense if the U.S. could be sure they could deliver steel without being interdicted by the Russian or Chinese navies in a world war. Supply chains collapse in wartime though, and it would require military resources to protect those supply lines.

It's also likely Trump wants to rile up Western leaders. They are almost uniformly weak and work against Trump on many issues. If you see how Trump works in the U.S., he often takes action that riles everyone up, causes chaos, and then negotiates a deal. Inertia is a powerful force. Shaking things up requires shaking things up, European leaders won't take trade seriously until there's the threat of a trade war.

The math of trade and the GDP formula are straightforward. Deficit nations such as the U.S. will experience an increase in GDP in a trade war because consumption doesn't collapse, it shifts from imports to domestic production. I've written about it before in GDP Stands For Garbage Data Point. In an extreme scenario, GDP could fall, but even a relatively hot trade war would boost U.S. GDP as consumer substitute domestic goods and services for imports.

The U.S. has the strong hand for this reason. If Trump asked nicely for a trade rebalancing, nothing would get done. If he threatens a trade war, and follows through with some tariffs, he gets attention and things start moving. If he credibly signals he's willing to take the pain required to rebalance, Europe and China will understand they'll take far more pain, and then they'll be motivated to avoid a confrontation. It's not the nicest way of negotiating, but it's a great way to get what you want.

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