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A Non-Strategy If the goal is to reduce the US trade deficit, the best approach would be to combat the dollar’s overvaluation, which hurts US exporters and encourages imports — not to adopt tariffs that benefit some industries at the expense of others. It’s also possible under international law to impose across-the-board tariffs (i.e., duties that don’t discriminate between industries or countries) for balance-of-payments purposes, and I have previously advocated consideration of such tariffs as a lever to bargain down the value of the dollar and prod surplus countries like China to expand their domestic demand. But steel tariffs don’t cut the mustard for this purpose. The Trump administration has justified its steel and aluminum tariffs by using a Cold War relic: a 1962 law that gives the president almost unlimited authority to impose tariffs on national security grounds. But there is no credible case that the US steel and aluminum industries cannot supply enough of these products for any conceivable national security crisis. Trump has already granted temporary exceptions for Canada and Mexico (intended as a bargaining chip to get them to accede to his demands in the NAFTA renegotiation) and offered to exempt other countries in exchange for reciprocal concessions. If revitalizing the country’s steel industry is truly a national security objective, it’s hard to see how tariffs that are imposed or withdrawn based on presidential whim and other negotiations would encourage steel companies to make long-term investments in new facilities. On the other hand, it’s important not to give too much credence to the doomsday predictions of free traders who warn that tariff-induced increases in steel prices will destroy large numbers of jobs in downstream, steel-using industries like automobiles and construction. While it’s true that there are far more jobs in downstream industries than in steel itself, the impact of higher steel prices on employment in such industries will probably be limited, and prices in any case may not rise by nearly as much as the 25 percent tariff rate suggests. Some downstream products could become less competitive, leading to increased imports in some sectors. But if more steel is produced domestically, there will also be some additional jobs created in industries that supply inputs for steel-making and those that serve local communities where steel mills are located — and such jobs will offset some of the possible losses in downstream sectors. Ultimately, employment in these other sectors will depend far more on demand for their products than on changes in steel costs. Another outcome that is far from certain is the prospect of a “trade war.” Free traders are issuing hysterical cries that US steel and aluminum tariffs will lead to massive retaliation by other countries. Having learned how the US political system works, foreign countries are threatening retaliatory duties on US exports from politically sensitive states, such as motorcycles from Speaker Paul Ryan’s home state of Wisconsin and bourbon from Senate Majority Leader Mitch McConnell’s home state of Kentucky. But to do this legally, those countries must first ask the World Trade Organization (WTO) to declare the US tariffs illegal or else engage in safeguard tariff investigations, either of which takes time. US exporters could eventually suffer, especially if other countries impose tariffs on major exports like corn and jet airplanes. But so far, Trump’s tariffs cover only a small fraction of US imports and we are still very far from an all-out trade war.