An Appeal to the Heart, Not Economic Principles

By Philip D. Caldwell

 

The announcement by the Trump administration to impose a 25 percent tariff on steel imports and 10 percent on aluminum imports has prompted some operators to bring their smelters and foundries back online. Though some factories are reignited, the move will not rescue communities leveled by globalization. Instead of fixing America’s trade deficits, the tariffs will breed global resentment and have far-reaching consequences.

 

Crucially, the tariff announcement resonated most in the communities where President Trump’s “Make America Great Again” message thrived. In America’s Rust Belt where it no longer made economic sense to conduct industrial operations such as steel and auto production, jobs fled overseas. What was left in their wake was feelings of pain and abandonment.

 

The tariffs are a message of empathy, a concrete policy to capture the anger and resentment felt by so many in the Rust Belt and middle United States. However, the increased tariffs will not bring economic benefits to the United States. While some jobs may return, it will not repair the damage done to the communities gutted by globalization and abandoned by multinational corporations for jurisdictions with cheaper labor and more favorable regulations. While the factories may return for now, the same economic forces that caused their closure will return as other nations reduce costs and find efficiencies to overcome the tariffs.

 

It is a powerful notion, the idea that the president will pull economic levers not based on sound economic principles for growth or for the betterment of the economy, but to appeal to the sentiments and emotions of his electoral base. Enter any first-year economics class and you will quickly recognize the benefits of trade and the detriments of protectionist policies.

 

In addition to economic growth, trade has lifted vast amounts of the world’s population out of poverty. However, there is a small margin that have not felt the gains of global trade, a silent majority in the United States. Whether directly affected or not, anyone who works for a living can empathize with those whose job prospects evaporated, communities crumbled, and whose hopes for a better life were dashed.

 

The fires of those foundries and smelters may spark hope that life can be better for those who have suffered the most. However, the reality is the clock cannot be turned back. While some jobs may return, they will never reach the vibrant levels they once held.

 

Steel and tariff imports have become a wedge at a time when cooperation with international partners and allies on such pressing issues as terrorism, nuclear non-proliferation, mass migration, and climate change is paramount. While there is the perception the tariffs will hamper those nations we are most in competition with, in reality they will cause harm to our closest allies and friends.

 

Canada, the United States’ northern neighbour and trusted ally, who shares its values and interests, was substantially threatened with the imposition of tariffs. These tariffs would have caused an inordinate amount of pain, approximately $3.2 billion in losses to the Canadian economy. And while Canada has since been exempted, to insinuate Canada’s aluminum and steel are a security threat to the United States is not only wrong, it is insulting. Though the administration argued for the tariffs in the name of national security, which the World Trade Organization’s (WTO) General Agreement on Trade and Tariffs allows, the move was made for political rather than security reasons.

 

The European Union (EU), a union founded on economic integration, the promotion of democracy, and protection of peace, will also feel pain from the imposition of the tariffs, with losses of $2.6 billion. This comes at a time when standing with European democracies to promote unity and cohesion in the face of external and internal pressures is imperative. The tariffs, will not go without retaliation, the WTO permits a country to retaliate if it finds the imposition of taxes and tariffs are in violation of its rules. The European Union would be permitted to institute taxes selectively in order to recoup its losses from the tariffs.

 

In fact, the European Union has already indicated its willingness to introduce counter-measures in retaliation to the imposition of tariffs on steel and aluminum. Strategically, the EU will look to target products from the jurisdictions of key political figures who carry influence and authority in Washington and with the White House. While the president may ignore lobbying by allied nations to turn away from tariffs, he will be forced to listen to those senior politicians whose districts will be negatively affected.

 

As those foundries and smelters return in the coming months, some may be tempted to think that we can return to the good times of yesteryear, when the American economy was driven by industrial manufacturing. However, the more difficult task is not to look back, but to look forward into the uncertain future.

 

Factories and foundries won’t remain forever; the shifting tectonic plates of the global economy will eventually ensure they are no longer a viable pillar of the U.S. economy. The U.S. must look to the future and be bold in taking on the next great challenges of our time. To reinvigorate those communities left behind the U.S. cannot rely on what we already know, but become leaders in what we do not. By challenging ourselves we will fail, but in failure we will learn, pick ourselves up again and move unabashed to the greater successes of the future. America is greater than dragging others down through taxes and tariffs. America is a country that succeeds on its own accord and can be a shining example of innovation and ambition for the rest of the world.

 

Philip D. Caldwell is a master’s candidate in the M.Sc. in Global Affairs program at New York University.