Holger Görg Gave an Interview on US New Tariffs on Steel and Aluminium Imports

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US President Donald Trump signed a proclamation authorising new tariffs on US steel and aluminium imports on March 8, 2018. Following his plan, foreign steel and aluminium products sold to the US are going to face a tariff of 25% and a tariff of 10% in the future, respectively. Steel and aluminium products from Canada and Mexico will be excluded from this new tariff plan. Whether further countries will be placed on the exclusion list, is still an open question. Shortly before Trump’s order, Prof. Holger Görg Ph.D., Managing Director of the Kiel Centre for Globalization, was interviewed by Peter Weitzmann from SR2 on the US new tariff plan and its potential consequences for the US and the world economy.

Görg indicated that currently we are still far away from free cross-border trade, with the cross-border trade within the EU single market as an exception. Different countries and regions like the US, the EU and China still impose tariffs on different kinds of foreign products sold to their countries/regions. As members of the World Trade Organisation (WTO), they are generally not allowed to impose tariffs on foreign products, except for dealing with imports with dumping prices and for protecting the national security. Trump justified his new tariff plan by emphasising the need to protect the national security of the US. According to Görg, whether this is indeed the case, is a question that WTO is expected to investigate.

Higher tariffs have been usually imposed on foreign products by countries/regions with a belief that domestic jobs can be saved and domestic industries can be better protected. Taking the US new tariff plan as an example, Görg explained in his interview that one may indeed see some first positive effects in the short run. Since foreign steel and aluminium products are expected to be more expensive because of the new tariffs, the US steel and aluminium industries may become more competitive than before. Some domestic jobs in these industries which may otherwise be already at risk may be kept in the US for a longer time. However, the new tariffs are expected to also have indirect negative effects on other US industries. Firms in, for example, automobile industry and beverage industry, may need to pay higher prices for steel and aluminium that they need for the production of their products. This enhances their production costs and may result in higher prices of their own products. High price increases are not advantageous for the US firms to be (further) competitive in the global market. Facing the new tariffs of the US, other countries and regions may also respond by increasing their tariffs on American-made products sold to their countries/regions. With increasing tariffs on foreign traded goods, consumers are expected to pay higher prices for many products than before. Such development is not advantageous for the international trade and for the world economy, either.

The complete interview (in German) can be accessed here.