‘Trump shot US economy in foot with steel & aluminum tariffs’ – Wall Street analyst
After months of postponing its implementation while simultaneously threatening a trade war, President Donald Trump has slapped tariffs on steel and aluminum imports. The EU, as well as Canada and Mexico, has vowed to retaliate.
Domestic reaction in the US has also been negative with both Democrats and Republicans criticizing the move. Wall Street analyst and economic commentator Michael Hudson believes the US could actually suffer more than Europe from the tariffs.
RT: The EU has vowed to retaliate. What steps do you expect them to take?
Michael Hudson: The irony of all of this is that there is a good logic for protectionism. And the object to protectionism is to import the raw materials as cheap as you can and make all your profit in manufactures in high value added. What Trump has done by putting the tariffs on aluminum and steel is to raise the price of aluminum and steel to Americans. They’ve already jumped about 25 percent since he announced the tariffs a few weeks ago. And all of a sudden this oversupply is going to be sold to Europeans and Asians. So, their manufacturers can buy aluminum and steel more cheaply to make manufactured goods at much lower costs than American manufacturers can.
So, Trump has given Europe and Asia an opportunity to undersell American manufacturers of tinware, of anything industrial: beer kegs, people have talked about, frying pans, cars, anything made out of aluminum and steel. Now, the foreigners outside of America will have an advantage over the American producers. Trump has shot the American economy in the foot. That seems to be his guiding principle.
RT: Does the EU need to do anything in retaliation? Do you think there will be a trade war? Or is Europe is going to sit back and enjoy the benefits?
MH: It has to do something legally. It can’t let America say we are going to put a tariff on anything we want in order to have all of the monopoly in the world in our country and make you pay monopoly prices. There is a reason there is an oversupply of aluminum and steel. And that is because other countries are afraid of American sanctions; they don’t know who America is going to move against next. So, they have to be independent in basic needs. Steel, aluminum but also agriculture, also information technology. So, what America is doing is telling Europe and Asia you have to go your own way, you can’t depend upon us. We are for America first and we are going to do everything we can to hurt you to help ourselves because that is how Mr. Trump made his fortune in real estate – by threats and intimidation and long lawsuits.
RT:To be fair to Donald Trump, he did say when he was on the campaign trail that this is the sort of stuff he was going to do. What is the affect going to be, first of all, on the American consumers?
MH: The price of anything made out of aluminum and steel is going to go up. So, the prices they pay will either go up or the companies that make things out of aluminum and steel are going to have to have their profits eroded by having higher costs. European exports and Asian exports are now going to have a competitive advantage over the US. In other words, Trump hasn’t read basic economic textbooks on how protectionism made Germany, France and America rich in the first place – or how protectionism is forcing Russia to be more independent. Russia it doesn’t need protectionist tariffs when it has something like American sanctions.
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