The tariffs on foreign steel and aluminum that President Donald Trump announced last week are a necessary opening move in a game that will take years to play out, but which America cannot safely delay any longer.
Trump is absolutely correct that this is a national security issue. A nation simply cannot remain a superpower without producing industrial metals like steel and aluminum. And more tellingly, the United States cannot count on the reliability of foreign supplies, or of even accessing them, in a potential military conflict.
Opponents of the tariffs have characterized them as the opening salvo in a trade war. But unless the world’s decision-makers become radically more stupid overnight, it will not spiral uncontrollably into a global trade collapse.
History does show, however, that trade conflicts are often ongoing, even under supposedly free-trade regimes. The current steel and aluminum tariffs dispute will likely differ only in scale from previous conflicts — like those with Japan in the 1980s that led eventually to the revaluation of the yen in the Plaza Accord.
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Trump’s imposition of tariffs is definitely a jolt to a complacent global trading system. The current charade of international free trade has been underwritten by the willingness of the United States to absorb the net surpluses of the world’s industrial powers, to the tune of half a trillion dollars a year. This is destined to fall apart at some point, and better sooner than later.
Will foreign nations retaliate? For sure, and there will be reverberations for years to come as the global trading system works out its trading imbalances on a diverse range of goods — and not just in the United States. The situation will take years of moves and countermoves to play itself out.
For America to rebalance trade, however, a cohesive strategy needs to rely on four elements: use of tariffs on foreign nations to force them to open their markets to U.S. goods; revaluation of the dollar to a trade-balancing level, by means of policies like a proposed Market Access Charge; use of tariffs on foreign nations to compel production back to the United States for more of the goods that Americans consume; and an industrial policy that not only focuses on trade but also includes government-funded development of future technologies — a necessary effort to position America as a nation with high-value goods for export.
Relying on any one of these strategies alone would be insufficient — though a better start than doing nothing. For example, driving down the value of the dollar could help to eliminate the trade deficit by making U.S. exports more competitive. But doing so would ignore the chance to rebuild job-producing supply chains. A better approach for an “America First” trade and economic strategy would be to utilize all four elements in concert. Recent experience has shown that merely out-innovating the world technologically while not securing domestic and foreign markets for these products simply results in more industries moving offshore.
The real test of the Trump administration on this issue is going to be the follow-through. However, it appears that Trump intends to continue on this path — and that the tariffs he has announced are not simply a flashy gesture intended to win votes. In the bigger picture, America’s future prosperity will depend on a robust approach to correcting failed trade policies — and one that includes more than simply targeted tariffs.
Ian Fletcher is the author of “Free Trade Doesn’t Work: What Should Replace It and Why,” and a member of the advisory board of the Coalition for a Prosperous America.
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