While President Trump's steel and aluminum tariffs may save some jobs in the steel industry, jobs may be lost elsewhere in the American economy. In addition, there's a strong risk of retaliation from other countries.
In this segment from Industry Focus: Energy, analyst Sarah Priestley is joined by Motley Fool contributor Daniel Kline to examine the potential impacts of these tariffs. They also discuss how tariffs have worked in the past by allowing the industries affected the breathing room needed to modernize and compete.
A full transcript follows the video.
This video was recorded on March 22, 2018.
Sarah Priestley: There's a couple of reasons, mostly, that people are against this. One is jobs. Obviously, the reason this has been put forth is that it's going to save a lot of steel jobs. However, some have predicted that it would lead to a net job loss, essentially, because other industries are going to see price increases. You also have construction, where they may put off development projects.
Dan Kline: And there's going to be retaliation. One in four Boeing planes go to China. China could easily decide to slow down those orders, to buy them someplace else. Other countries aren't just going to say, "Oh, hey, there's a tariff, now I just won't sell stuff to America." There's absolutely going to be jobs lost in the shipping business and in all the trades that make things with steel.
Priestley: Absolutely. So, we're waiting to see the reaction. We've seen some claim about the soybean exports that we give to China, too. But, a lot of this evokes a memory of protectionist measures that have been taken before that haven't been successful. There was a steel protection between 1968-1984. It didn't modernize the industry, and it continued to decline. The key thing about a lot of these trade tariffs and trade protection measures is not so much the end goal to save jobs, but also to allow the industry some breathing room to modernize and become more efficient. Therefore, at the end of the tariffs, they're in a better position to compete. George W. Bush also briefly imposed a 30% tariff on steel in 2002. That got overturned by the World Trade Organization. And this could happen in this instance, too. Overall, there's a lot of negativity.
Kline: I'm not sure he has any intent of this being a long-term tariff. I think we really have to think about, yes, he may implement it out of spite because people say he shouldn't. But, the reality is, it's a negotiating tactic, and we're starting to see a little bit of thawing with saying, maybe Canada, maybe Mexico, there could be long-term exceptions to this. And, I imagine with China, something will happen.
Priestley: I think Canada and Mexico, he's basically said they're exempt. I think we get 25% of imports from our neighbors, and it would not be wise to irritate both of those.
Daniel B. Kline has no position in any of the stocks mentioned. Sarah Priestley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.