President Trump’s steep new tariffs signed into law on Thursday could lead to bigger trade battles in the months to come. Even before the announcement, 11 Asian Pacific nations signed a pact to slash tariffs on their mutual trade. Hari Sreenivasan and Peter Goodman from The New York Times discuss what this may mean for free trade going forward.
How Trump’s claims that tariffs are needed for national security could set a problematic precedent
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The president's decision to impose stiff tariffs on aluminum and steel could lead to bigger trade battles in the months to come.
This afternoon, President Trump said his actions would lead to new manufacturing and jobs. He cited both economic security and national security as the justification for doing so.
Mr. Trump says those metals are crucial for building military weapons and aircraft, and there must be enough U.S. facilities that can produce aluminum and steel domestically.
But, after pressure, the president has exempted Canada and Mexico for now and suggested flexibility for other countries as well.
Peter Goodman covers global economics for The New York Times and joins me from London via Skype.
So, let's put this in perspective. Mr. Trump, even on the campaign trail, said this is about jobs, this is about economic security, but now the reason includes national security as well.
Well, the national security claim is a direct nod to the World Trade Organization and the assumption that these tariffs are going to be challenged and there's going to be retaliation from a whole host of countries that are aggrieved, principally the European Union.
We think we are going to get a challenge at the World Trade Organization from the European Union. And this national security claim is a bet that the World Trade Organization, which is like the referee in the global trading system, will not be willing to question the sovereignty of a member country, and that they will defer to the right of a sovereign country to determine their own national security.
But, you know, most economists, trade experts, they think — I mean, I heard terms yesterday talking to economists like patently absurd, that there's just simply no legitimate claim that can be made on the basis of national security, because let's remember that something around 70 percent of the steel that is used in the United States is produced in the United States.
So, whatever we want to discuss — and, you know, there are issues to discuss in terms of the steel industry in the context of the global economy. There's a big glut of steel. A lot of it is produced in China. These are real issues. There are people out of work at steel plants in the United States, but you know, a lot of that's automation, it doesn't even have to do with trade.
And the notion that somehow Americans are waking up imperiled by the fact that, you know, Canadians are making steel and aluminum, that's a tough one to sell.
Let's just assume for a second. Let's say this nod to the World Trade Organization, this adding of national security keeps us out of that particular court. Couldn't other countries start to claim national security for their own trade tariffs and barriers?
In fact, a lot of people think that this tees up a kind of existential crisis for the World Trade Organization, because, whatever they do, it's going to set an unpleasant precedent that could disrupt global trade going forward.
If they do say, OK, Washington, Trump administration, you do have the right to declare this a national security threat, then that does, indeed, open the door to just about any country that wants to protect a favored industry, with domestic politics getting involved in global trade issues, and they can say, well, this — you know, the French could say, boy, cheese is so vital to us that the idea that Kraft could send us, you know, something like camembert or parmesan, we're going to call that national security.
I'm obviously being facetious, but there are lots of examples. One economist told me this would open the floodgates to some very broad claims. On the other hand, if the World Trade Organization overturns this, if they say this is not a legitimate security claim, then that could prompt the Trump administration to either just ignore the order.
I mean, this would be like the referee being ignored in an athletic match, and the match goes on. It undermines the credibility of the World Trade Organization. Or in the most extreme case, they could say other countries now have carte blanche to retaliate, and we could have a full-blown trade war, with potentially the Trump administration pulling out of the World Trade Organization.
Let's explain also the exemption for Canada and for Mexico right now, while we are in active conversations looking at NAFTA.
Well, we're not really clear on what just happened at the White House. I mean, we saw that the president signed these two orders launching these tariffs, 25 percent on steel, 10 percent on aluminum.
And he did say that, for the time being, Canada and Mexico are going to be left out because we are currently renegotiating, the United States is renegotiating the North American Free Trade Agreement, this giant trade bloc that encompasses Canada, the United States and Mexico.
And Mr. Trump has essentially combined that negotiation with this tariff proceeding. And a lot of trade experts say that that could undermine the claim of national security, both in the court of public opinion around the world and at the World Trade Organization, because, you know, if this is a question of, boy, we better make sure that we have got enough steel to make warships or weapons or whatever in the event of a real national security threat, then how can you treat it as a sort of trading chip in the context of a negotiation of a whole range of issues with Canada and Mexico?
But that seems to be where we're headed, with potential other exemptions maybe for Australia. Mr. Trump suggested that he's going to look at how other nations are behaving, whether they're paying the bills, an apparent nod at NATO. It sounds like there is going to be a complex process, a real negotiation over who is going to have to pay these tariffs and who will be exempted.
All right, Peter Goodman of The New York Times joining us via Skype from London, thanks so much.
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