Monday, March 12, 2018

Steel & Aluminum Tariffs Are Vital for National Security

"I haven't been much of a savant on trade policy. I proceeded to educate myself. As a result, it is clear to me that Trump's 25% steel and 10% aluminum tariffs are vital for our national security. Here's why.
The US has been hemorrhaging jobs in these heavy industrial areas to third world countries for the last few decades, largely because those countries still run on cheap labor and zero regulation whereas US manufacturers don't.
For example, average hourly wages in Communist China are about $3.50/hour, which is ironically higher than it was even five years ago. The Government is dictatorial and is very close with the business conglomerates that run the Chinese economy, unlike the US.
A significant portion of steel in the United States comes from abroad, utilizing low tariffs to get a cheap source of American hard currency. This is what is fueling a huge trade deficit in steel.
Communist China has been very aggressive here, dumping cheap steel into the US market, causing much of the US steel industry to take massive losses. Countries such as South Korea, Taiwan, and Italy have also engaged in this.
Steel is like oil, it goes into everything. It is a base resource, one that a shortage of will effect everything in the economy - which means that a shortage would be a huge national security problem.
The last time something like this happened was in 1973 with the Arab Oil Embargo. After the elimination of the Gold Standard hurt OPEC, they reached the breaking point after the United States supported Israel in the Yom Kippur War. In order to punish the US and try to stop its favoring of Israel over Syria/Egypt, OPEC put an embargo on selling oil to the United States.
This devastated an already stagnating US economy, skyrocketing unemployment and inflation beyond what had already happened. Oil, like steel, makes the economy run. The shortage killed the economy and exacerbated the decade of horrible recessions and malaise.
Imagine, if you will, a country in which a significant portion of steel consumption of the US decides it doesn't like US policy. That country could threaten to embargo America unless the policy is changed - we are left with either knuckling under or having our economy crushed. Our EU friends know this risk, and have engaged in the same actions they criticize us for. Tariffs on steel in the EU are very high.
In business, you never have most of your supplies from one supplier. Or as an investor you never put most of your money in one investment. It's just asking for problems or extortion. Our country needs a strong base of steel and aluminum, just as it needs strong oil production. Or else we're essentially putting our economy in the hands of our rivals, endangering our national sovereignty."
"When a country Taxes our products coming in at, say, 50%, and we Tax the same product coming into our country at ZERO, that's not fair or smart. We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!"
President Trump

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