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EconoFact: “What is the National Security Rationale for Steel, Aluminum and Automobile Protection?”

Summary:
From EconoFact, an update: The Trump administration has implemented a number of trade related measures purportedly on the basis of national security. First, it invoked the seldom-used provision of the trade law to investigate whether imposing import restrictions for steel and aluminum is justified by national security reasons. The Commerce Department’s investigation concluded that imports of both metals pose a national security risk and subsequently the administration applied tariffs and quotas to both products. In a new investigation, the Commerce Department has started looking into whether imports of cars or automobile parts could impair U.S. national security. One just has to recall, you don’t typically take Ford Mustangs into war, and even if we took sedans into battle, we get most

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From EconoFact, an update:

The Trump administration has implemented a number of trade related measures purportedly on the basis of national security. First, it invoked the seldom-used provision of the trade law to investigate whether imposing import restrictions for steel and aluminum is justified by national security reasons. The Commerce Department’s investigation concluded that imports of both metals pose a national security risk and subsequently the administration applied tariffs and quotas to both products. In a new investigation, the Commerce Department has started looking into whether imports of cars or automobile parts could impair U.S. national security.

One just has to recall, you don’t typically take Ford Mustangs into war, and even if we took sedans into battle, we get most of our auto imports from allies (at least they are allies right now). My concluding paragraph:

Imposition of these tariffs under the guise of national defense could have large negative economic effects even in the absence of retaliation. For instance, one estimate indicates a 40,000-job loss in the automobile industry (a heavy steel user) from the steel tariffs alone. With the expiration of exemptions on the EU, Canada and Mexico, some $50 billion of steel and aluminum imports are now covered by tariffs. One can expect the employment impact to be even more substantial. Adding in retaliation (but incorporating the now defunct exemption for Canada and Mexico), the consulting firm Trade Partnership estimated a net loss to the economy of 470,000 jobs. The Peterson Institute for International Economics estimates a 25 percent tariff on imported automobiles (currently at 2.5 percent for non-Nafta members, and 25 percent for trucks) would reduce employment by 195,000 over the course of three years. With retaliation, that number would rise to 624,000.

Interesting fact: by statute (10 U.S. Code § 2505), Canada’s industrial base is considered part of the Nation’s defense industrial base. And yet we are imposing national security rationalized tariffs on Canada…

Finally, remember — we (or Mr. Trump’s aides) — are doing this in the name of national security while he contemplates giving ZTE a pass.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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