The stock market has been on a bit of a roller-coaster for weeks, but it took an immediate dive Thursday when President Donald Trump unilaterally raised tariffs on imported steel and aluminum — materials essential to almost all manufactured goods.
The goods — from washing machines to bicycles to airplanes — are what American consumers buy, meaning when prices go up, it is not foreigners who pay the new import taxes, but Americans.
Louisiana, as a major trading state, has serious reasons for concern, even though Nucor and other domestic makers of steel have operations here.
Protectionism is on the rise under Trump, and the downsides of this decision may not be long in appearing.
Farm-state senators fear that agriculture — a huge U.S. export — may be an immediate target of retaliation from China and other big manufacturers of steel. Louisiana is a big exporter of food and fiber, too, and thus might see some early blowback from the White House action.
The basis for this action is a U.S. Commerce Department determination — completely expected, since it comes from Trump’s surrogate, Commerce Secretary Wilbur Ross — that steel and aluminum exports undermine national security by hurting American producers of metals.
We think this is a bit of a stretch.
Trump, a protectionist who is apt to blame U.S. economic dislocations on other countries, needed a legal loophole to impose a tariff, and it is in a 1962 law that allows the president to act if Commerce finds particular imports to be a national security threat.
While this rationale may be ridiculed, correctly, there remain problems with countries like Communist-ruled China subsidizing domestic industries such as steel; the World Trade Organization is supposed to police these issues, and has, but quite often U.S. companies feel the process is slow and unlikely to help them in anything like a timely fashion.
All that said, there’s a reason the markets dropped more than 500 points within minutes of the White House announcement: International trade is fundamental to America’s prosperity.
A tariff, like the president’s moves on steel, and earlier on Chinese-made washing machines — yes, washing machines — means that American consumers pay more for their products, because makers can’t get the best deal on raw materials for their products.
The problem of retaliation by targeted countries is real.
Louisiana is a massive exporter, through our concentration of railroads and ports, of high-dollar petrochemical products. We don’t know what action by China or other countries may follow. But even Communist dictatorships have to account for public opinion, and such unilateral American actions may well provoke a nationalist reaction across the globe. Who knows what products will be on the retaliation list? But we are quite certain, especially given Trump’s reputation as a bull in the diplomatic china shop, that other countries are already considering forceful action in response.