Does stopping metal imports alone cover the trade deficit of the USA?

  • This article argues a possible trade war that might start as a consequence to steel tariff:

    Appearing at a joint press conference in the White House, Mr Trump was asked how he would avoid his steel tariff “escalating in a trade war”.

    Mr Trump responded: “Well, we’ll have to see. When we’re behind on every single country, trade wars aren’t so bad. You understand what I mean by that?

    “When we’re down by $30 billion, $40 billion, $60 billion, $100 billion [in trade deficits], the trade war hurts them, it doesn’t hurt us. So we’ll see what happens. "

    This article shows the EU's reaction:

    European Commission President Jean-Claude Juncker in an earlier statement said: "We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification.

    "We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk ... The EU will react firmly and commensurately to defend our interests."

    Since both US and EU are huge economical actors, one should expect that such a "trade war" if started, to have significant global economical effects (measured in tens of billion $).

    From Trump's declarations I understand that he hopes that a potential trade war to help alleviate the trade deficit, but it is unclear how this would happen, especially when EU very likely to react.

    Question: Does stopping metal imports alone cover the trade deficit of the USA?

    The EU is upset that the US is protecting their interests? Is that considered unusual?

    @immibis: The EU is upset that the US imposes import tariffs for economic reasons despite its previous agreement not to do so (and its insistence that other countries not do the same). Of course nobody ought to be upset that a country protects its own interest *per se*.

    We'll put a Levy on your Chevy, we'll tax your Whisky & Rye.

    "Not based on any national security justification" how does the manufacture of metal used in every piece of military hardware not constitute a matter of national security? When did we start taking off-the-cuff comments (or tweets) from DJT seriously?

    "Does stopping metal imports alone cover the trade deficit of the USA?" - I don't see any evidence that Trump is claiming that it will. He seems to merely be stating that a trade war would hurt the EU more than it hurts the US.

    @JaredSmith When he started running for holder of the single most powerful position in the United States, whose whims are orders of magnitude more important than basically anyone else's, and when he started posting those whims on his Twitter.

    @NicHartley Trump isn't consistent in the *same sentence*, much less over the course of his Presidency. People taking him literally might be good for antacid sales, but won't necessarily give much insight into actual US policy.

    @JaredSmith I think either you misread or I worded that badly -- I don't mean that it gives insight into his policy decisions. I mean that it shows what he's thinking about. For better or worse, he basically has no filter, so whatever's on his mind is on his Twitter, and that means that his Twitter feed is a decent suggestion of how he's thinking. People might not take them as literal declarations of formal policy, but they certainly take them seriously.

    @NicHartley very true, I just wish they wouldn't since, as you pointed out, stream-of-conciousness and whatnot.

    @JaredSmith At the same time, though, that stream of consciousness belongs to the President, so... if he fixates on some subject, it's good to have forewarning. At the absolute very least, it's a self-propagating cycle -- people will pay attention as long as other people pay attention, because otherwise they're not working with as much information as their competitors.

  • Philipp

    Philipp Correct answer

    4 years ago

    According to the US census bureau, the trade deficit of the United States in 2016 was $504.8 Billion.

    The recent US import tariff increase is on both steel and aluminum. In 2016, the United States imported $21.9 billion worth of steel and $12.4 billion worth of aluminum and bauxite (aluminum ore).

    So even if the tariffs manage to reduce the US steel and aluminum imports to zero, it will reduce the US trade deficit by 7% at most.

    It is also likely that these import tariffs will increase the cost of manufacturing goods from steel and aluminum in the United States. That means it might get cheaper to import these from abroad and harder to sell them on the world market. This would counteract the trade deficit effect.

    So bottom line, this measure alone will not balance the US trade deficit. But it might contribute to balancing it if combined with many more such protectionist measures.

    The main beneficiary of this measure will likely be the steel and aluminum industry in the United States. With the competition from abroad off the US market, their products might become a lot more lucrative.

    If we believe John Oliver: "everything is soup \[can\ i.e., the cost of steel is relatively negligible¶ You might mean "*without* competition" (not "with")

    @jfs no, I mean "with". The "with" applies to the situation "competition off the market", not to the competition alone.

    *So even if the tariffs manage to reduce the US steel and aluminum imports to zero, it will reduce the US trade deficit by 7% at most.* And even that only if the trade deficit in other sectors remains stable; but the trend points to larger deficits since 2009.

    Even if it did reduce imports significantly, doing so would tend to make the dollar rise. This would partially counteract the reduction in imports by making _other_ imports cheaper and exports more expensive. For that reason, even if metal imports equalled the entire deficit and they were completely banned, it would still not eliminate it.

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Content dated before 7/24/2021 11:53 AM