By Will Hanafan (Creighton University)
When President Donald Trump came crashing through the doors of the White House back in 2016, he brought with him a completely new attitude and set of ideas. At the heart of this new attitude towards the country came his notorious mantra, “Make America Great Again”. His campaign and slogan focused on the concept that in order to “Make America Great Again”, we needed to focus our ideas and efforts around putting America first. This included drastic changes in foreign policy. One of these changes included the addition of steel and aluminum tariffs that were to be placed on many of our allies such as Canada, Mexico, and the European Union. President Trump began to impose these tariffs early in the year 2018. Now, as we stand almost a full year into these tariffs the question remains; has America benefited from these tariffs?
What exactly is a tariff? Tariffs have been used by the United States since our birth almost two and a half centuries ago. Simply put, they are taxes placed on imports. They are generally charged as a percent in relation to the import being purchased. Tariffs were much more important to United States’ revenue earlier in its history. Back in 1912, roughly 30% of the United States’ revenue came from tariffs. This has drastically changed during modern times as the revenue that the United States generates off of tariffs now hangs around 1% annually. Early 20th century economic changes made it impossible for the revenue from tariffs to ever rise this high again but recent tariffs imposed by President Trump might have other effects on our economy.
The question then arises as to who benefits from this sudden increase in tariffs. The answer depends on what exactly is being taxed. Trump’s more notable tariffs were the ones placed on steel and aluminum. The tariffs included a 25 percent tax on aluminum and a 10 percent tax on steel. One of the main purposes of imposing these tariffs is to keep jobs in the United States as opposed to overseas. When you impose a tax on a foreign aluminum or steel company you force them to raise prices to pay for the tax. When these foreign companies raise their prices it causes them to lose business to companies that do not have to raise theirs. Steel and aluminum companies based in the United States increase their sales as the demand for domestic steel and aluminum goes up because they do not have to pay the tax. This allows for the growth of steel and aluminum industries in the United States, therefore providing more jobs to American people.
While domestic job growth in the steel industry sounds great for the economy, it is not that simple. The United States is the world’s largest importer of steel, meaning that we bring in more steel than any other country. However, only 2 percent of our imports are made up of aluminum and steel. Many countries have already retaliated with their own tariffs in response to the tariffs Trump imposed, creating somewhat of a “trade war”. Economist Andrew Hunter predicts that “the hit to other industries from higher prices will outweigh any boost to domestic steel and aluminum producers, particularly when that boost may not be very large.”
This brings us to the final question. Does America really win due to the tariffs? While the domestic, steel and aluminum industries benefit from the tariffs, many other industries may not. It is too soon for Americans to feel the effects of the tariffs but many economists agree that the tariffs will actually do more harm than good. Is it possible that in Donald Trump’s vision to “put America first”, he may be setting us behind by imposing the tariffs?