President Trump on Thursday announced he will reimpose 10 percent aluminum tariffs against Canada. Originally enacted in 2018 on national security grounds, the tax was an obvious sticking point in negotiations over the United States-Mexico-Canada Agreement (USMCA) and was suspended in May 2019. Reimposing tariffs is misguided policy for four reasons.
One, other countries nearly always retaliate. A Canadian official has already said that Ottawa “will react very similarly to the last (time they imposed) tariffs.” This meant tariffs against $12.6 billion of American-made goods as diverse as toilet paper, coffee, and sleeping bags. Trump’s reinstated tariffs will cause double damage to consumers and businesses in both countries.
Two, the timing is awful. The U.S. economy has just experienced its worst decline in recorded history, including the Great Depression. Unemployment is in double digits. President Trump should not make matters worse by increasing taxes on U.S. consumers and businesses and raising tensions with America’s largest trading partner.
Three, aluminum-using industries from beverages to autos to electronics will have higher costs. That means higher prices for consumers, who will then have less money to spend on other goods. Moreover, much of the aluminum industry itself does not want the tariffs, saying so less than two months ago in an open letter to U.S. Trade Representative Robert Lighthizer.
Four, the point of the new USMCA trade agreement, which came into effect on July 1, was to reduce trade barriers. It succeeded for barely a month. CEI’s decision to oppose the agreement is so far being vindicated, though we would rather be proven wrong.
It is time for Congress to reclaim the tariff-making authority it delegated to the president. He is clearly incapable of using them responsibly—even during the COVID-19 pandemic. Rather than raising taxes and tensions at the worst possible time, the administration should lower trade barriers and continue to pursue regulatory relief.
For more on trade, see my recent paper on COVID-related tariff relief, and Iain Murray’s and my paper “Traders of the Lost Ark” for a better vision of trade policy. More ideas are at neverneeded.cei.org.