The Impact of Trade Tariffs on the United States Economy
The recent move by President Trump's administration to impose trade tariffs on Chinese Aluminium and Steel is anticipated to have various future impacts on the United States' economy. According to McBride, the increase in the cost of consumer products that are made from steel and aluminium is among the expected consequences of the trade tariffs on Chinese Steel and Aluminium. It is widely known that steel and aluminium are used as raw material to manufacture a variety of products, ranging from motor vehicles and musical instruments, which are used by most Americans. Both Toyota, a car manufacturing company, and Moog Music, a music instrument manufacturing company, has indicated that they will be forced to increase prices of their products giving the production cost that has been contributed by the trade tariffs imposed on Chinese aluminium and steel. In addition to increased cost on consumer goods and services, it is expected that the general supply of goods and services will substantially decline (Wallin and Emelie13). Products and services shortage will inconvenience various business and consumers who depends on them.
Possible Shutdown of Companies and Businesses
In his article, Pettinge indicates that various companies and businesses that once depended on Chinese aluminium and steel as either raw material or transacting goods are faced with the risks of shutting down. The shutdown will be mainly because of the increased cost of production. According to Pettinge, small firms and companies are the ones most likely to be impacted by the move as they will not be able to adjust to the new operating cost. Shutting down of firms and companies will be a huge blow to the United States economy considering that the United States economy amasses substantial amounts of revenues informs of operating tax from these businesses and companies. As noted by Pettinge, the process of renegotiating steel and aluminium supplying deals will see some companies lose; hence they will be facing immediate closures.
Risk of Unemployment
Another possible consequence of Trump's tariffs on Chinese aluminium and steel is that many people are faced with the risks of unemployment or losing their jobs (McBride, 2018). Unemployment comes in the sense that companies will now need fewer employees given the reduced operations as a result of raw materials shortages. In addition, some companies are planning to lay-off a considerable number of employees in an attempt to reduce the cost of operations which will see many Americans lose their jobs. Increased number of unemployment in the United States will have myriad negative impacts on the American economy. First, there is a reduction in revenues that are collected in the form of income tax. Second, Gross Domestic Production (GDP) will also decrease with reduced operations in various companies across the United States.
Possible Positive Impacts
There are also some possible positive impacts of the imposed trade tariffs on Chinese aluminium and steel (McBride). President Trump himself and some economists believe that the United States economy stands to benefit substantially from the imposed tariffs. Particularly, President Trump notes that the tariffs will reduce the trade deficit that has been experienced in past years between the United States and China (Ducharme). In addition, many economists and President Trump expect that the move will revive the American steel and aluminium industry (Pramuk). Various American aluminium and steel producers such as Century aluminium applauded the move claiming that it will help the development of American aluminium industry.
Works Cited
McBride, James, “The Risks of U.S. Steel and Aluminium Tariffs.” Council On Foreign
Relations, 2018, https://www.cfr.org/backgrounder/risks-us-steel-and-aluminum-tariffs. Accessed 6 December 2018.
Ducharme, Jamie, “Trump's Tariffs Against China Are Sparking Fears of a Trade War. Here's Why You Should Care.” Fortune, 2018. http://fortune.com/2018/04/06/what-is-tariff-definition-trump-china/. Accessed 6 December 2018.
Pramuk, Jacob, “Trump thinks his tariffs are saving the US steel industry” CNBC, 2018. https://www.cnbc.com/2018/08/16/trump-says-his-tariffs-are-saving-us-steel-industry.html. Accessed 6 December 2018.
Pettinge, Tejvan “Effect of US steel tariffs” Economicshelp, 2018. https://www.economicshelp.org/blog/24571/trade/impact-of-us-tariffs/. Accessed 6 December 2018.
Wallin, Emelie, and Emelie Åström. "" Trade wars are good, and easy to win": A study of Trump’s steel tariffs and international trade." (2018).
