Friday, March 9, 2018

Extortion by Tariff

Remember the Bush steel tariffs of 2002?  (Don't all raise your hands at once!)  They were abandoned after eighteen months, having done more harm than good.

Unlike Tr*mp, Bush genuinely wanted to help the American steel industry.  Tr*mp, along with the usual political pandering, is trying to use traditional Tr*mpian "negotiating" tactics to strong-arm concessions on other fronts from American allies.  Of course, those allies will be familiar with Tr*mp's history of paying his bills — so the tactics are likely to fail.

The administration is not even trying to disguise its attempt to gain advantage in the ongoing NAFTA talks; more threatening, though, are the concessions Tr*mp may hope to extract from major steel exporter South Korea.  President Moon Jae-in has been demonstrating far more independence than his right-wing predecessors; and you can be sure the White House is displeased.  Maintaining the threat of war with North Korea is far more important to America's military contractors than an increase in the price of steel: after all, their increased costs will be paid by the US government and its taxpayers.

Moon's domestic support is based largely on the prospect of rapprochement with the North: hopefully, Moon will hang tough.  North Korea will not give up its nuclear weapons, its hard-won protection against external aggression.  Having provided evidence of his offensive capacity, Kim Jong-un will be willing to stop testing bombs and missiles for a time.  The world's best hope is that the Kim-Tr*mp summit will lead to years of talks — years with no immanent threat of war.

Nobody seems to be talking about the country likely to be hurt most by the new tariffs: Brazil, a major exporter of steel to the US.  Even if there is something the US wants to extort from Brazil, Brazil's government is too tied up in corruption scandals to negotiate effectively.  Of course, a bit of corruption won't stop the Chinese from stepping in to fill any gaps the tariffs leave in the Brazilian economy.

The Tr*mp tariffs may last a little longer than the Bush tariffs, but not long enough to justify opening new steel plants; or even to reopen the older, inefficient plants that still can be made operational.  The steel companies will be content just to raise prices.  Some businesses that use steel, though, may decide it's time to offshore production.

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