Trade Wars Produce Victims, Not Victors

If trade wars are easy to win, as President Donald Trump claims, one wonders why more countries don't start them. The truth about trade wars isn't complicated, it is just less politically convenient for the president. The easy part of a trade war is producing victims, the hard part is producing victors. This is something that the White House might actually understand (though not accept) even as the president presses forward on his abrupt threat to impose tariffs of 25 percent on imported steel and 10 percent on imported aluminum. The initial threat was to impose tariffs across the world, but on Thursday the president exempted Mexico and Canada from the new tariffs — if they play ball on a rewrite of NAFTA. One reason for that sidestepping might just be that Texas would very much be in the crosshairs if the president made good on his initial push. In fact, Texas may be the most vulnerable of the states. Texas imports more than $8 billion annually in steel and aluminum products, the most in the nation, and more than the next two states, California and Illinois, combined, according to a Brookings Institution analysis. Texas companies manufacture auto parts that are shipped to Mexico and Canada for final assembly and then returned to the United States as a finished import. Tariffs would simply drive up prices, forcing consumers to pay more for automobiles. And it wouldn't stop there, of course. Oil and gas, commercial construction, and aerospace industries would all see prices go up. Those prices would then cascade through the economy to hit consumers. NAFTA partners, Mexico and Canada, provide about 32 percent of all U.S. steel and aluminum imports — so consumers would see price increases.More broadly, Canada, China, and the European Union have already threatened higher tariffs on American-made products, potentially hurting U.S. exports. And this is just an opening salvo. What's likely to follow are retaliatory blasts from other nations against a host of U.S. products. That is what happened in 2002 after the U.S. enacted narrowly targeted steel tariffs. The global backlash led to an estimated 200,000 plus job loss to the U.S. economy. In the end, the tariffs were rescinded.  Continue reading...