Editorial | The panic of 2018?

Editorial | The panic of 2018?

Let's remain calm while we await details on President Donald Trump's threat to impose tariffs on imported steel and aluminum.

Trump's announcement last week that he's imposing new tariffs on steel and aluminum — along with his comment that "trade wars are good, and easy to win" — have a lot of people excited about what's going on.

"With this, the declaration of (a trade) war has arrived," said German politician Bernd Lange, who heads the trade committee at the European Parliament.

Nonsense, replied U.S. Secretary of Commerce Wilbur Ross. He characterized rhetoric like Lange's as "scare tactics by the people who want the status quo."

The idea of either tariffs or a trade war is not to many people's liking. Students of the Great Depression, for example, contend that one of the factors that exacerbated the 12-year economic disaster was the Smoot-Hawley Tariff Act, which imposed higher taxes on over 20,000 imported goods from 1930 to 1934.

But it's too early to become alarmed because the administration has not produced specific details on which countries will be affected or justifications why higher tariffs would protect national security.

For example, Trump vowed to restrict the trade of any country that has "an unfair trade relationship with the United States."

What's an unfair trade relationship?

Here's how Trump described it.

"When a country taxes our products coming in at, say, 50 percent, and we tax the same product coming into our country at zero, not fair or smart. We will soon be starting reciprocal taxes so that we will charge the same thing as they charge us," he said.

That hardly sounds unreasonable. But it remains to be seen if Trump's explanation is merely simple or simplistic.

For the time being, however, there's no indication of how these new measures will be implemented.

News reports state the White House has provided no information or details about how these trade practices would go into effect.

Indications are that the administration will impose a 25 percent levy on imported steel and a 10 percent levy on aluminum, although it is not clear whether all U.S. trading partners will be affected.

The problem with tariffs on products like steel and aluminum is that they raise prices. That's good for domestic producers of those commodities but bad for those who buy them to make other products. Eventually, the tab gets passed down to the consumer in the form of higher prices.

At the same time, tariffs imposed on our trading partners encourage them to impose tariff on products they import from the U.S. That means U.S. exporters will sell less to foreign buyers because foreign buyers will have to pay more for what they import.

That's why legislators from U.S. states that export agricultural products are deeply concerned with Trump's action. At the same time, unions representing U.S. steelworkers are pleased.

So not only is the economics of what's happening confusing, so are the politics.

Trump made it clear during his campaign that he was unhappy with U.S. trade deficits and planned to do something about them. At the same time, Democrats have also expressed skepticism about the benefits of trade agreements, including the North American Free Trade Agreement.

But what is the cause of the U.S. trade deficit?

Is it the result of other countries imposing high costs on U.S. exports? Is it caused by U.S. consumers' voracious appetite for goods made by foreign manufacturers? Is it the result of both?

It's a complicated business, one that can have a tremendous economic impact and cause significant collateral concerns.

One was the stock market's jittery response to the tariff news.

The reaction is understandable. But those who are concerned should wait for more details before going off the deep end about an impending trade war.

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