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How Trump’s tariffs could backfire on the U.S. economy

President Trump announced stiff new tariffs on imported steel and aluminum on Thursday at a meeting with industry leaders. The president said the U.S. needed to crack down on countries flooding American markets with cheap metals. Judy Woodruff sits down with Greg Ip of The Wall Street Journal to discuss what this means for Americans and the fears it could spark a trade war.

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  • Judy Woodruff:

    President Trump promised during the campaign to get tougher on trade, and today he took a major step by announcing new tariffs on imported steel and aluminum. It has led some experts to warn of the possibility of a much bigger trade war.

    But at a meeting with industry leaders, Mr. Trump said the U.S. needs to crack down on countries flooding American markets with cheap metals. And he told the business leaders that the move would give them a big boost.

  • President Donald Trump:

    Pretty much all of you will immediately be expanding if we give you that level playing field, if we give you that help.

    And you're going to hire more workers, and your workers are going to be very happy. They're going to be very, very happy. And, again, what's been allowed to go on for decades is disgraceful. It's disgraceful.

  • Judy Woodruff:

    Mr. Trump said he would announce which countries would be targeted next week. There would be 25 percent tariffs on steel and 10 percent on aluminum.

    A number of Republican allies, including the speaker of the House, Paul Ryan, took issue with the president's decision.

    The president has repeatedly threatened to take tougher measures against China.

    And the Wall Street Journal's Greg Ip is here now to explain what all of this might mean.

    Greg, thank you for being with us.

    Before we get into the reaction to all this, including in the markets, what would tariffs at this level, 25 percent on steel, 10 percent on aluminum, generally, what would that mean?

  • Greg Ip:

    Well, for companies in the United States that make steel and aluminum, it's great news.

    Those companies like Nucor or U.S. Steel or Alcoa will have higher profit margins because they can sell their steel and aluminum at higher prices. It's good news for their workers. Those industries have lost a lot of workers because of import penetration over the last 15 years.

    Fewer jobs will be lost. Maybe a few jobs will get some added. It's good news for some parts of the country where those mills are located.

    It's bad news, though, for any company that uses steel and aluminum. And that's a lot of companies, way more companies and workers than actually produce it.

    Automobiles, for example, aerospace, the companies that make soda because of the soda cans, tinfoil. All the consumers, you and I will all pay a tiny little bit more, maybe too little to notice, but, yes, we will pay more for those products.

  • Judy Woodruff:

    And I was going to say, we actually have some graphics showing some of that. And maybe we can show that to the audience while we're talking.

    But, in essence, so the president sees winners in this country, but there are others who are worried that the reaction from abroad is going to lead to harm for other parts of the American economy.

  • Greg Ip:

    Well, absolutely, and we have seen this movie before.

    In 2002, President George W. Bush raised steel tariffs, partly to protect workers in West Virginia. And the analysis of that decision later showed it actually hurt the U.S. economy because it raised cost so much in industries that use steel.

    Right now, people are worried not just about the immediate impact on the U.S. industry, but what if all these other countries that feel that we have treated them unfairly retaliate? So, not only are those effects hurting us in terms of our consumption of those products, but our ability to sell to those other foreign markets is affected.

  • Judy Woodruff:

    How much does that explain what happened in the financial markets today?

  • Greg Ip:

    So, I think the negative impact on the stock market reflects a couple things.

    First of all, a tiny bit of harm to U.S. growth, a little bit of upward pressure on inflation, at a time when the Federal Reserve is already talking about raising interest rates some more.

    Secondly, though, I think it also speaks to the overall degree of uncertainty and concern about this administration. You know, for the first year of Trump's presidency, it was all about less regulation and less taxes. Business loved that.

    Now they're seeing the less positive side of it, more protectionism. At the same time, enormous conflict both within the White House, within Trump's own advisers, and between the administration and its allies in business and the Republican Congress.

  • Judy Woodruff:

    And we were told that there was serious disagreement inside the White House, as you are just suggesting, over this. And there was also confusion about whether this was going to be announced today.

    We were told at one point it wasn't, and then the president announced it a few minutes later.

  • Greg Ip:

    Right.

    And, as you were saying, I think that some of the details have yet to be heard. We don't know specifically which countries are going to be hit with tariffs, how long they will last. And it may be that there are other attenuating factors that will come into play. So, this all creates a lot of uncertainty around the decision

  • Judy Woodruff:

    All of which we will wait to see.

    Greg Ip, thank you very much.

  • Greg Ip:

    All right, thanks for having me.

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