I thought free trade was good? US places 522% tariff on Chinese steel

by omouggos

Donald Trump is seen as dangerous bogeyman of sorts by the political establishment. The neo-conservative Max Boot has recently penned an article which argues Trump is the greatest danger to US national security.[1] He wrote, “Trump is an ignorant demagogue who traffics in racist and misogynistic slurs and crazy conspiracy theories. He champions protectionism and isolationism — the policies that brought us the Great Depression and World War II.

One editorial bemoaned “Protectionism’s scary comeback,” referring to both Trump’s and Sander’s rhetoric.[2] Paul Ryan, the Republican Speaker of the House, has partly justified his refusal to endorse Trump due to his belief in the conservative principle of free trade.[3] President Obama criticized Trump during a commencement speech saying “The world is more interconnected than ever before, and it’s becoming more connected every day. Building walls won’t change that.”[4]

So if we are to believe the establishment, one of Trump’s greatest and unpardonable deficiencies is his protectionist stance, in other words his refusal to axiomatically and dogmatically accept that unqualified free trade is among the most salient and beneficial principles in the modern world. Since we are being incessantly told that free trade is such a great thing, I was rather surprised when I learned that the US has just levied a rather hefty 522% tariff on Chinese steel imports![5]

You see China has a glut of steel and steel producing capacity. In fact the output of China’s steel mills equals that of every other nation in the world combined.[6] This gargantuan supply capacity is a result of the monumental credit bubble which underpins China’s economy. The Chinese are looking to offload all this steel to foreign markets at very cheap prices. Such dumping of cheap Chinese steel on countries such as Britain and the US, will greatly hurt the indigenous steel industry which is unable to produce steel so cheaply. Under this economic backdrop, the US decided to step in and protect what remains of the American steel industry and place a 522% tariff on imported Chinese steel.

It is not my intention to argue or determine whether such a tariff is an appropriate policy to be adopted by the US or whether it is not. What interests me instead is that at one level we are told by government officials and establishmentarians that protectionism, which is what this tariff amounts to, is a terrible thing and that Trump who is an advocate of protectionism is unfit for the Presidency partly because of such advocacy. Yet, it is the US government, presumably led by Obama, that themselves are implementing tariffs and hence are practicing protectionism. Listening to Obama I thought that building walls was bad, yet the tariffs implemented on China effectively amount to an economic wall, but I guess that is OK since its Obama that is doing it.

While there are many advocates of free trade who are true believers of the dogma, I suspect that most such proponents are not true free traders, but just opportunists who at any given time do and advocate what profits them. Such people, when they drone on and on, promoting free trade and criticizing protectionism are full of bullshit. When it suits them they are free traders and when it doesn’t they are protectionists. However, since Trump is not part of their little elite club and because he seems to want to promote the interest of the American people, when he advocates protectionism than he is guilty of an unconscionable sin.

Beyond this it will be interesting to see what China’s response to America’s tariffs will be. Already tensions between the US and China are high due to the former’s surveillance flights near Chinese territory.[7] With America levying tariffs on Chinese steel, we have the beginning of a trade war between the two nations. Hopefully this economic conflict will not escalate into a actual shooting war between China and the US.

O Mouggos


[1] http://www.bostonherald.com/opinion/op_ed/2016/05/max_boot_biggest_us_security_threat_trump

[2] http://www.postandcourier.com/20160502/160509925/protectionismx2019s-scary-comeback

[3] http://buchanan.org/blog/whos-conservative-heretic-125260

[4] http://www.slate.com/blogs/the_slatest/2016/05/15/obama_criticizes_trump_at_rutgers_says_ignorance_is_not_a_virtue.html

[5] http://www.zerohedge.com/news/2016-05-19/china-furious-after-us-launches-trade-war-nuke-522-duty

[6] http://davidstockmanscontracorner.com/iron-ore-bust-getting-worse-price-heading-to-30s-bankruptcies-coming/

[7] http://www.zerohedge.com/news/2016-05-20/china-demands-us-cease-immediately-provocative-spy-plane-missions-near-its-borders