With free trade, the ideal purpose of the agreement is to give traders the freedom to buy and sell from various economies without the application of any governmental regulations such as tariffs, prohibitions, or quotas on goods and services. In other terms, free trade is directly opposite to economic isolationism, or trade protection. In today’s world, many nations such as America and members of the European Union have introduced free trade agreements in their countries and as a result, have significantly lowered international trade barriers.
Since then, many traders have enjoyed from the benefits of free trade for many years. However, these policies have not come without various challenges and backlash from society. The recent decision from President Trump to support U.S. steel workers and impose tariffs on steel products from China has fueled a huge debate on whether this will be an overall good move for the country. Presumably, there have been various responses over Trump’s proposed tariff on Chinese steel from both supportive and opposite sides. The following research and analysis show the economic, social and political affects America will foresee if this tariff is approved.
In early March of 2018, President Trump’s made it known to China that a 25% tariff will be forced on its steel entering the U.S. market. This is on top of 10% tariff on all imported aluminum products (New York Times). The tariffs’ announcement was affected on claims that other nations’ trade practices have endangered and jeopardized America’s national security through reduced domestic production. Through the proposed tariff, Americans are expected to be the big winners while China will be the big losers (Low 97). Further, the losers will equally include industries and traders who primarily depend on aluminum and steel as their main inputs as they will have to spend more on the latter. Some of such industries include America’s biggest industries for instance aerospace, construction, heavy equipment, and the automobile sector.
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It is worth noting that in the vent of the situation’s escalation, there will be serious consequences especially on the U.S. first, should EU and America introduce various tariffs, especially on the vehicle manufacture industry, the effect could erode the America’s growth projections as well as that of the European Union. Currently, America is enjoying trade in goods shortage with the European Union of approximately $38 billion, with almost $78 billion sold to Europe from America, as well as $16 billion going the other way. As such, on the event that the tariffs are raised by 10 percent above the normal or the proposed levels, then the OECD estimates that it would probably slash down global trade by a whopping 6 percent (Kuhn 146).
The international market is still wondering what is underway if Trump’s proposal is to go into full effect. In regard to the same, the European Union has echoed that it will respond by introducing tariffs on many US goods as well as initiating a case against America at the World Trade Organization (WTO), since it is the internationally recognized for making global trade policies (Low 98). The situation will even be worse if Trump decides to take on EU’s countermeasures with new actions, which will quickly roll out the conflict.
It is important reflecting on the impact on consumers as they are the ultimate people who suffer as a result of trade wars. Many years of globalization has made it possible for retailers to sell their goods and also offer their services to any part of the world. This implies that introducing higher tariffs is likely to elevate the cost of doing business even for small-scale holders (Kuhn 146). As such, manufacturers would be forced to increase their prices to accommodate the rising cost of raw materials especially aluminum and steel from China. Shielding America’s steel industry could help its employees for the time-being; however, if America lacks the ability of reducing the price of steel just as foreign rivals, then the U.S industries could be liable to high costs of the pricey product.
According to Barber’s warning, the proposed tariff could likely increase the cost of many products affiliated with steel manufacturing regardless of whether American industries will get an alternative means of getting steel, and the retaliation from the European Union could cause a serious impact on full sales, dealers, suppliers, and customers as well. Further, apart from motorcycles, the European Union has strongly warned that it could introduce additional tariffs on Levi’s jeans, whisky, and orange juice, which could target American exporters and increase the cost of imports for EU customers (Barber 34).
In summary, it is worth noting that Trump’s newly proposed tariff on steel from China would cost America more than it is expected to advantage it. Moreover, the American industries will suffer more, and they will be subject to closing their businesses or pumping a lot of resources whose outcome will not be any promising. As such, the Trump administration should consider consulting the Chinese government and the EU for further actions that will ensure that all the three regions are contented with the decision they will make on Trump’s proposed tariff. This will not only save America’s economic state, but it will equally ensure balanced and diplomatic decision making among the countries in question.
