'Why should we continue these deals?' Trump is floating a radical idea on trade that an expert says 'definitely could happen'

Donald TrumpPool/Getty ImagesDonald Trump.

A recent report in Axios detailed President Donald Trump’s latest drastic flotation on trade — one that could ignite an international trade skirmish.

And although one expert who spoke with Business Insider said it was clear the White House is testing the waters to see what the response would be to such a proposal, they believe “this stuff definitely could happen.”

Axios reported Friday that Trump and top administration officials recently discussed imposing massive tariffs on major exporters of steel. The tax would be about 20% and could be expanded to other goods such as paper, semiconductors, aluminium, and large household appliances, the report said.

In the Thursday discussions at the White House, Axios reported that the sentiment in the room was 22 against the tariffs and three in favour — along with Trump himself. The plan is backed by chief strategist Steve Bannon, Commerce Secretary Wilbur Ross, White House National Trade Council chair Peter Navarro, and senior policy adviser Stephen Miller.

While the move would be aimed at punishing China, Axios wrote that officials told Trump major allies such as Canada, Germany, Japan, Mexico, and the UK would be affected. Axios wrote that more than three-quarters of those present at the meeting told Trump the tariffs were a bad idea, but Trump remained supportive because it would excite his base of supporters.

In recent days, Trump’s tweets have signalled a renewed focus on trade.

“Really great numbers on jobs & the economy! Things are starting to kick in now, and we have just begun! Don’t like steel & aluminium dumping!” Trump tweeted Monday. He said Wednesday that the US has “made some of the worst Trade Deals in world history.”

“Why should we continue these deals with countries that do not help us?” he tweeted.

Asked about the Axios report, a White House official told Business Insider that they could not comment on the specifics.

“The president hasn’t made a final decision on the tariffs issue,” the official said.

Lee Branstetter, a Carnegie Mellon University professor who served on President Barack Obama’s Council of Economic Advisers from 2011 through 2012, said it’s been a common theme to see some of the administration’s more drastic policy measures get leaked to the media to illicit a response.

He attributes some of the past trial balloons not moving forward “at least in part in response to the pushback.”

As for this proposal, Branstetter said it appeared to be linked to the administration’s national security investigation into steel imports, which was launched in April. Under section 232 of the 1962 Trade Expansion Act, the government is allowed to impose tariffs on steel imports in the name of protecting national security. The White House investigation was launched to assess the national security effects of steel imports into the US.

“Imposing 20% tariffs on steel imports is definitely” within Trump’s powers as a part of the 1962 act, Branstetter said. “This stuff definitely could happen.”

But on its face, Branstetter said the proposal is “just absolutely ridiculous.”

“Our steel imports, for the most part, come from friendly nations,” he said, noting Western Europe, Japan, South Korea, and Canada.

Branstetter said that, if those imports were 20% more expensive, US firms would be limited in how competitive they could be in both US and global markets with regard to every “Made in America” product they produce that uses steel.

Among those industries, the auto and construction industries would be most negatively affected, he said.

“So for every steel job this policy measure ‘saves’ in Pennsylvania, you’ll lose two auto industry jobs in Michigan,” he said.

“I wouldn’t be surprised if auto executives start calling the White House and telling him ‘we’re going to lay off X many people if you do this, and we’re going to blame you,'” he added. “I mean I sure hope they have the balls to do that. Maybe they don’t.”

If Trump is seeking a political win in the short run, Branstetter said he doesn’t see this as the way to accomplish one.

“Even if we interpret this as a craven effort by an administration that is willing to undermine the national interests in the long run to seek political gain in the short run, it’s a stupid way of getting to that,” he said. “Because he’s undermining more of his base than he is buttressing.”

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