President Bush imposed steel tariffs in 2002 — and it didn’t go so well for the U.S.
The news last Thursday sent the stock market into a slump and tossed a wrench into ongoing NAFTA talks. Trump continues to stand firm on the tariffs, but a look at the country’s track record should perhaps give the president pause.
In 2002, George W. Bush imposed tariffs — which are essentially a tax imposed on imported items — on steel in an attempt to revive the industry in the United States.
“This relief will help steelworkers, communities that depend on steel, and the steel industry adjust without harming our economy,” Bush said in a statement at the time.
The opposite largely occurred as a result: job losses, material shortages, production delays and increased costs.
The tariffs added costs for both businesses and consumers, states a 2003 report from the U.S. International Trade Commission.
According to the report, the tariffs resulted in a host of headaches, including:
- 49 per cent of steel-consuming firms reported some difficulty obtaining steel,
- 32 per cent of manufacturers, including automakers and canneries, reported delays in production,
- 19 per cent of firms passed along price increases to customers,
- Overall employment in the sector generally fell or remained flat.
At a hearing, the commission heard that “most steel-consuming firms who testified reported substantial increases in the price of steel after the imposition” of the tariffs.
The report does indicate that U.S. producers saw an uptick in domestic purchases and wages lifted.
Thousands of jobs were lost; one report — from an industry group — said roughly 200,000 jobs hit the chopping block.
“They lost 200,000 U.S. jobs, it didn’t serve their purpose, it was ruled illegal by the WTO, and it was just a mess,” said Walid Hejazi, an associate professor of international business at the University of Toronto.
Canada was exempt from Bush’s “temporary safeguards,” but the European Union was not, and the EU hit back at Bush with tariffs of its own after the World Trade Organization deemed the tariffs a violation of international trade agreements.
WATCH: Canada threatens retaliation for Trump’s trade tariffs
“When the WTO ruled that Europe could retaliate, they were allowed to put a similar value of tariffs on any goods they wanted,” Hejazi said.
“They chose oranges, because they come from Florida. They chose exports that come from the U.S. swing states, that are really, really close in an election.”
In 2003, Bush reversed the tariffs.
Hejazi predicts Trump’s tariffs will prove to be “a similar blunder.”
Trump’s tariffs facing broad pushback
Republicans have been vocal in their opposition to the indiscriminate tariffs, with House Speaker Paul Ryan on Monday urging Trump to drop the tariffs over concerns they will jeopardize the economy.
“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” said AshLee Strong, a spokeswoman for Ryan. “The new tax reform law has boosted the economy and we certainly don’t want to jeopardize those gains.”
The WTO warns that a trade war over the tariffs — Trump is proposing a 25 per cent tariff on foreign steel and a 10 per cent tariff on imported aluminum — could spark a recession. A new report estimates that the U.S. would see a net loss of 146,000 jobs.
WATCH: White House says Trump confident ‘we would win’ trade war
Still, Trump holds firm, tweeting Monday morning that Canada could escape the tariffs should it concede to NAFTA negotiation demands. And despite all the warnings, and even his own suggestion that “trade wars are good,” Trump insists the tariffs will be imposed but that there will be no trade war.
“We’re not backing down,” Trump said Monday afternoon. “For many years, NAFTA has been a disaster. … If they’re not going to make a fair NAFTA deal, then we’ll leave it this way.”
“I don’t think you’ll have a trade war,” Trump said, in response to questions from media.
Trump’s comments suggest he has a “misunderstanding of trade,” said Pedro Antunes, deputy chief economist at the Conference Board of Canada.
“The idea that he can win a trade war – this is just another one of these crazy ideas that I think fundamentally economists and most people agree are bad – somehow the administration in the U.S. is thinking they can win from these kinds of wars,” Antunes said.
WATCH: Trudeau to let Trump know proposed steel tariffs ‘unacceptable’
Not only would Canada’s steel sector take a hit, Antunes said, the country would see an impact on the “broader supply chain.” But it wouldn’t just be Canada feeling the pinch.
“It’s going to be a big impact on both the U.S. and Canada,” Antunes said.
“It’s going to increase prices in the U.S., and in Canada it’s going to be a huge issue for some of those specific industries.”
— With a file from Reuters and Global News reporters Abigail Bimman and Maham Abedi
© 2018 Global News, a division of Corus Entertainment Inc.