Phil Gramm and Donald Boudreaux at WSJ:
Because steel and aluminum are crucial in manufacturing, anything close to a 50% tariff will drive up the cost of U.S. manufactured products dramatically. That will harm consumers, make U.S. manufactured products far less competitive on the world market, and significantly increase the probability that tariffs will drag the economy into a recession. By making reciprocal trade agreements more difficult to negotiate, Mr. Trump’s steel and aluminum tariffs will increase the probability of retaliation against American exports and an all-out trade war.
But these tariffs will hurt more than the economy. They will harm national security by increasing the cost of two essential components of defense procurement just as Congress is poised to increase military spending by $100 billion. The defense industry is already struggling to replace ordnance and equipment sent to Ukraine and replacing ordnance expended by Israel will add to that burden.
While total imports compose less than 14% of the U.S. economy, steel imports make up 25% of U.S. steel consumption. The U.S. imports roughly half its aluminum consumption. The new 50% tariff will have negative economic effects far larger than the original 25% tariffs in 2018. Those had carve-outs for Canada and Mexico, the largest suppliers of steel and aluminum to the U.S. Brazil and Korea were also exempt. The 2018 tariffs didn’t cover derivative products that could be imported as substitutes for raw steel and aluminum. This time around prices for consumer goods, such as lawn furniture at Walmart, and producer goods, such as robots in manufacturing plants, will rise as tariffs are imposed on their steel and aluminum content.