Another battle front has opened in the ongoing trade war between the United States and the rest of the world. On Monday, President Trump announced via a series of tweets that he will be reinstating tariffs on steel imports from Brazil and Argentina.
Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries. The Federal....— Donald J. Trump (@realDonaldTrump) December 2, 2019
The move made breaking news and once again sent steel prices and market projections in a tail spin. CBS news reports:
The Trump administration exempted Brazil and Argentina, among other allies, from the 25% steel tariffs and 10% aluminum tariffs it imposed last year. U.S. Trade Representative Robert Lighthizer told Congress in March 2018 that the president decided to "pause" implementation of the metal tariffs because the countries were in the middle of trade talks with the U.S.
After announcing his plans to restore the tariffs on the two countries, Trump also directed tweets at the Federal Reserve that the entity should "act" so that the two countries don't devalue their currency.
.....Reserve should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our manufactures & farmers to fairly export their goods. Lower Rates & Loosen - Fed!— Donald J. Trump (@realDonaldTrump) December 2, 2019
The Federal Reserve does not share Trump's enthusiasm for steel tariffs as it outlined in notes released over the summer. On tariffs levied against China from the U.S., the Federal Reserve said:
First, higher tariffs are equivalent to a tax increase, with negative effects on consumption and investment. Second, given China's important role in global value chains, an increase in bilateral tariffs could disrupt supply chains, with significant negative effects on output. Third, increased uncertainty could dampen GDP if firms delay investment and hiring. Finally, the same forces could negatively affect sentiment and roil international financial markets. Outside of these immediate though eventually temporary effects, a persistent increase in tariffs would likely negatively affect the long-run productive capacity of the economy.
In summation, the Federal Reserve advised that implementing steel tariffs might be more trouble than they are worth for America's economy. "All told, these results suggests a limited long-run imprint from a further significant increase in tariffs by the United States and China."
For more insights into domestic and international steel markets, visit the Steel Reports section at SNIPSmag.com.