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Monday, March 5, 2018

Bernstein: Trump’s tariffs [feedly]

Trump's tariffs

To an extent, I join with the conventional wisdom that Trump's tariffs on steel and aluminum will do more harm than good, but if that's where your analysis stops, you're not going nearly far enough: At WaPo, with more coming tomorrow or Tues (with Dean Baker).

Probably the most salient concern here is retaliation–ie, trade partners blocking our exports–though could be mitigating factors there as well. With 12% of GDP in exports, we're less exposed to countervailing tariffs than other advanced economies. Also, to the extent that retaliation generates a GDP drag from larger trade deficits (think about that, Trump), the Fed could raise less quickly–or pause in their "normalization" campaign.

Also, here's an interesting wrinkle. As I note below, most of our trade partners have good reason to object to the administration's rationale (national security risk generated by diminished capacity in sensitive industries). But since, unlike team Trump, they're likely to be more rules oriented, they might decide to take their case to the WTO, which takes at least six months to deal with such cases.

But while the Chinese dump steel below cost on global markets, most others (Canada, Brazil) do not do so, and we buy a lot more from them than we do from China. And there is no scenario I can think of wherein Canadian exports invokes "national security" risk, which was Trump's rationale for this.

So do not confuse my attempt to see some nuance here with support for Trump's actions.

 -- via my feedly newsfeed