There is one view that Donald Trump and his policies are too inward looking and protectionist, and as such are causing a series of problems for the country’s economy. On the other hand is the view that the economy is in robust good health, with the stock-market booming, unemployment falling and a healthy annual growth rate. What is the actual situation – particularly in light of the Trump's recent trade policies?
The US has imposed tariffs on steel and aluminum brought into the United States beginning 1 June 2018. There will be a 10% tariff on aluminum and 25% tariff on steel that is brought in from allies such as the EU, Canada and Mexico; making suppliers from these countries significantly less competitive in the US.
Allies of the US, such as the EU and Canada have expressed concern and disappointment at the move and are also threatening to impose retaliatory measures. The EU’s exports totaled €6.4bn (£5.6bn) in 2017. Annually, there is £360m worth of steel exported from the UK to the US; which constitutes, 10% of the industry's total exports. Canadian PM, Justin Trudeau has called the tariff imposition “frankly insulting and unacceptable”. The Chinese have also warned that other trade deals may be called off if the tariff impositions go ahead.
Critics have rejected the security concerns cited as the reason for the tariff imposition. The EU thinks that these measures are protectionist and unfair and a fit case to place before the WTO. The EU trade commissioner has called them ‘illegal’. Trump's top economic advisor Larry Kudlow has also admitted that the looming trade dispute could jeopardize the US economy; though he feels that US trade allies are overreacting.
A virtual trade war would break out as a result of the US imposition of metal tariffs, feel some experts. Experts are also warning that this move will undermine open trade and weaken confidence in the global economy. There is the apprehension that this will result in job losses in the US as well as its trading partners. There could be job losses in America because of rising manufacturing costs to companies that use metal; companies that could be forced to cut costs by laying off employees.
In spite of Trump’s policies that have frequently been criticised at home and abroad, the US story looks sound. The country’s economy is growing at a healthy 3.2% and economic activity in sectors such as construction, retail, auto manufacture is brisk.
American stock markets have reached ‘historic highs’, because of Trump's promises of infrastructure investment, his US centric policies and tax cuts for corporations. Unemployment is down as well:, in December 2017, it was down to 4.1%.
The stock market boom owed itself in large part to Boeing; the stock of this company rose 82% during the last year. The unemployment rates have been steadily falling since 2011 and continued to fall after Trump assumed office. Also the growth rate of 4% cited by some sources seems unlikely in a developed country say most economists. While Trump claims credit for the currently robust economy, there is a strongly held view that this economy's trends owe themselves largely to policies from the Obama tenure. Further, the negative trade balance increases pressure in the administration to do something to correct the situation. Perhaps the metal tariff impositions are an attempt to redress this balance? One does wonder if the ‘looming trade war’ is a fair price to pay.
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