From chief economic advisor Gary Cohn to U.S. Senator Ben Sasse to the Wall Street Journal editorial board, President Donald Trump’s announcement on steel and aluminum tariffs is eliciting lots of pushback from free traders.
“These tariffs are a terrible idea,” the American Enterprise Institute’s Michael Strain told me. “I would expect much better policy from a Republican administration, given the party’s traditional support for free trade.”
And then there’s Steve Moore, a distinguished visiting fellow at The Heritage Foundation, who is warning that “steel and aluminum import tariffs make the U.S. less attractive and more expensive and in the short, medium and long run will cost many times more jobs than they protect.”
Moore jumped on the Trump train in 2016, telling Republicans this is Trump’s “populist, working-class party,” not Reagan’s party. He was quoted saying the campaign “turned me more into a populist.”
But now, when it looks like Trump is really about to break with free-market orthodoxy by embracing tariffs, Moore can’t abide.
What we are witnessing now is, among other things, a test of how much Trump controls the party. Can he really lead them anywhere? Or are free-market conservatives like Moore prepared to stand their ground on this one?
For now, at least, they are standing up to him.
Don Boudreaux, Professor of Economics at George Mason University (and longtime critic of Trump’s protectionist philosophy), agreed with Moore, telling me that while there are hundreds of thousands of Americans who work for steel-or aluminum-producing companies, there are more than 5 million Americans who work for companies (like Ford or Coca-Cola) that require steel or aluminum to manufacture their products.
“Tariffs will also harm the pro-growth effects of the tax cuts, stall the economic, incite a trade war, and help hand the election to the Democrats,” adds David McIntosh, head of the Club for Growth.
(They could also stoke inflation, tank the stock market, cause the Federal Reserve to raise interest rates, and alienate international allies—but who’s counting?)
Of course, Trump’s provocative rhetoric doesn’t always manifest in policy, and we still haven’t seen the details. Could it be that this is much ado about nothing?
Scott Lincicome, a trade lawyer at the Cato Institute and Duke Law adjunct professor, fears this is more than just economic saber rattling. “The difference between this and what Trump tweets is that here Trump is actually acting under a statute (Section 232 of the Trade Expansion Act of 1962),” he said. “It’s interesting that everybody’s just now picking up on this. There’s only one thing that he’s been perfectly consistent on, and that is protectionism.”
Lincicome also fears the invocation of national security as a rationale. In the past, Secretary of Defense James Mattis has said that the U.S. needs just three percent of total steel production to satisfy its current and future demands. But the Department of Commerce recently warned that, “The quantities and circumstances of steel and aluminum imports ‘threaten to impair the national security.’”
“The real systemic threat here,” said Lincicome, “is that other countries say, ‘Look, if they’re going to exploit this loophole”—in which the World Trade Organization allows an exemption for national security, and each country essentially defines for themselves what this means—“then so are we.’”
In other words, America risks escalation that could weaken the WTO until it is a shell of its former self.
Then again, for Trump—who seems to want to break or renegotiate international trade agreements—this might be a feature, not a bug.
As for Stephen Moore, he calls the national security rationale for tariffs “even phonier” than the economic one he lambasted, adding: “Many of steel imports come from Canada―traditionally our greatest ally in the world. Does anyone worry about American dependency on Canada for steel?”
Over the last year, or so, Donald Trump has invoked numerous arguments that strained credulity.
Could it be that we have finally found the man of steel’s kryptonite?