America’s recent history with steel tariffs is not great.
The last time a U.S. president imposed sweeping steel tariffs on American trade partners was in 2002, when George W. Bush introduced a complex package of restrictions that triggered a wave of retaliatory import taxes from the European Union.
Here’s how things played out, in light of President Donald Trump lifting the exemptions for Canada, Mexico and the European Union on his 25 per cent steel and 10 per cent aluminum tariffs Thursday.
The tariff plan
Bush’s steel tariffs took effect on March 20, 2002. The plan taxed various types of imported steel at different rates, with some of the percentages designed to scale down over time. He also granted exemptions to more than 75 countries, including Canada and Mexico at the outset, and added a number of other carve-outs later on.
Bush said at the time that the tariffs were needed to safeguard American steelmakers.
The EU led the charge in fighting Bush’s tariffs, taking the issue to the World Trade Organization, where it ultimately won permission to respond in kind.
The EU slapped equivalent tariffs on a whole host of symbolic items from Republican-voting states, including oranges from Florida, where Bush famously edged out Al Gore to win the presidency in 2000.
The whole saga ultimately ended in a very George Bush “mission accomplished in Iraq” sort of way, with the president backing off on the tariffs 16 months early and declaring that they had done their job.
Economists were more skeptical, with politically-opposed interests suggesting that the economy had either gained or lost jobs as a result of the tariffs.
A U.S. International Trade Commission study found in 2003 that Bush’s tariffs resulted in a net loss of US$30 million annually, when offset against tariff revenues.
Economy expert and free-trade advocate Gary Huffbauer says Bush’s tariffs ultimately paid off politically, if not economically.
“This was a vote-buying exercise,” Huffbauer, a senior fellow at the Peterson Institute for International Economics, told GlobalNews.ca.
Huffbauer says Bush “blinked” in the face of retaliatory tariffs because he had already won support to pass a key trade motion in Congress, which made it easier to push trade deals through the legislative process.
“His heart wasn’t in it to begin with,” Huffbauer said of the tariffs.
The tariff saga also didn’t hurt Bush at the polls, as his Republican Party accomplished the rare feat of adding seats in the House and Senate in the 2002 congressional midterms.
The tariff package was initially expected to last for three years, But Bush cancelled it 16 months ahead of schedule amid intense pressure from the EU and the World Trade Organization.
WATCH BELOW: Canada to impose ‘dollar-for-dollar’ retaliatory tariffs on the U.S.
What does this mean for Trump?
Trump has long characterized himself as a deal maker, but he’s largely only managed to kill deals since becoming president. He’s scrapped American participation in the Trans Pacific Partnership, the Iran nuclear deal and the Paris Climate Agreement. He also forced the renegotiation of NAFTA and has threatened to cancel that deal, too.
Huffbauer suggests Trump’s steel tariffs are simply a negotiating tool that will help him pressure Canada and Mexico on NAFTA, and the European Union on automotive exports.
To that end, Huffbauer predicts Trump’s tariffs will ultimately be negotiated into quotas that keep imports at or near current levels.
WATCH BELOW: Wilbur Ross says countries ‘will get over this in due course’
As for any potential political gain, Huffbauer says the tariffs will likely have little effect on Republicans’ midterm chances in November. His base loves when he thumbs his nose at foreign powers, but he’s already won those votes, Huffbauer said. If anything, he may start to feel the pressure once retaliatory tariffs start hurting voters in Republican-held states.
“On balance, I don’t think this is a vote-getter for Trump,” Huffbauer said.