The recent US tariffs applied to the countries allies are almost certain to backfire. Not only will the tariffs lead to higher prices to Americans, but the EU, UK and Canada are set to respond in kind. This may well result in reduced exports from the US and job cuts. Tariffs on US goods in the EU will make Asian and home-grown goods cheaper than US imports.
White House Says Effect of US Tariffs on Prices ‘Tiny’
While the White House insists that price increases will be ‘tiny’ this will be far from the truth. A 25% import tariff will not have just a ‘tiny’ effect on prices. Reduced import of US goods by the EU will affect employment. The majority of economists within and outside the US agree that the impact will be detrimental to US exports, consumer prices and to jobs.
The 10% tariff on aluminum and 25% US tariffs on steel will have a significant impact on the US economy and practically wipe out much of the benefits gained by December’s tax cuts. Add to that reduced imports of US goods by the EU and Canada, and American jobs will be at serious risk. The combined effect of all this will not be ‘tiny’! Even major Republicans are unhappy with Trump’s actions.
US Tariffs Means Increased Steel Prices in US
One result of this will be an increase in steel prices in the US. The car industry may suffer badly, not only due to increased prices for steel but also potential reductions in the purchase of US automobiles in Europe. Analysts believe that the effect on steel prices outside of the US may be limited because the effects of the new US tariffs on steel and aluminum will be spread over a range of markets.
That means that the US will face the most significant economic impact resulting in job losses and price increases. Some estimate job losses at more than 400,000 at a time when the country was approaching full employment. US car manufacturers will face higher steel costs than their EU counterparts. Steel prices in the US have already risen, and a reduction in steel imports will have the effect of raising them even further to US manufacturers.
US Consumers to Face Brunt of Price Increases
In fact, it is absolutely possible that prices outside the US will fall, while American consumers face significant price increases. You cannot always run a country like you would run a business! Jobs lost in the car and the aluminum drinks can industries will be a lot more than any saved by imposing tariff protection on these two metals. This will result in a net loss to the US, and the potential of future economic woes as its allies refuse to trust President Trump any more.
US Tariffs and Losses to US in Agriculture
The main losses to the US will likely be in agriculture, harming the Republican states that voted Donald Trump in. Its ailing car industry may also be badly hit with higher steel prices. All the good work that helped employment to reach such high levels may all now collapse. Time will tell, but Canada, Mexico, the EU and the UK will not sit idly by and watch it all happen. They have the economic power to hurt the US with tit-for-tat measures. US tariffs on the EU and UK, in particular, may harm political relationships.
