Trump's all-out trade war is rattling Washington -- even his strongest allies

  • The Trump administration on Thursday announced tariffs on Canada, Mexico, and the European Union for steel and aluminium imports.
  • The White House cited national security as the primary reason for the tariffs.
  • Republicans and Trump allies broke from the administration, calling the tariffs “dumb” and a threat to the economy.

WASHINGTON – President Donald Trump’s decision announced on Thursday to impose tariffs on Canada, Mexico, and the European Union for steel and aluminium has reignited tremendous frustration from his Republican allies on Capitol Hill and elsewhere, breaking from longtime free-trade orthodoxy on the right.

The tariffs will amount to 25% on steel and 10% on aluminium that previously did not apply to certain trading partners. The White House justified the tariffs in a statement that current steel and aluminium imports “threaten to impair national security” and “are driven in large part by the worldwide glut from overproduction by other countries.”

The tariffs announcement has already begun to have adverse effects on markets, with trading partners saying retaliations are in order and signalling a large-scale trade war on the horizon.

Republicans say tariffs are ‘dumb’ and hurt economic gains

But the decision to include Mexico and Canada increased the level of anger in Washington, especially among Republicans.

“This is dumb,” Nebraska Sen. Ben Sasse said. “Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents. We’ve been down this road beforeĀ— – blanket protectionism is a big part of why America had a Great Depression. ‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.'”

House Ways and Means Chairman Kevin Brady said the tariffs “are hitting the wrong target” that “puts American workers and families at risk, whose jobs depend on fairly traded products from these important trading partners. And it hurts our efforts to create good-paying U.S. jobs by selling more ‘Made in America’ products to customers in these countries.”

WASHINGTON, DC - MAY 14: U.S. Commerce Secretary Wilbur Ross points to a chart he brought during his keynote remarks during the Newsmakers Luncheon at the National Press Club May 14, 2018 in Washington, DC. Last month the Commerce Department banned shipments of American technology to Chinese telecommunications equipment manufacturer ZTE for seven years, saying that the company broke sanctions against Iran and North Korea and then lied about it. But after ZTE announced it may collapse due to the U.S. sanctions, President Donald Trump said he would work with Chinese President Xi Jinping to ease the damage. 'Too many jobs in China lost', he tweeted. (Photo by Chip Somodevilla/Getty Images)Chip Somodevilla/Getty ImagesUS Secretary of Commerce Wilbur Ross.
Sen. Orrin Hatch, a reliable ally for Trump, said the tariffs amounted to “a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers.”

“We should build on our success in overhauling the nation’s tax code with complementary trade policies that, rather than favouring one narrow industry, make all sectors of the US economy more competitive,” Hatch added.

Even House Speaker Paul Ryan dismissed the decision as counterproductive.

“I disagree with this decision. Instead of addressing the real problems in the international trade of these products, today’s action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China,” Ryan said in a statement. “There are better ways to help American workers and consumers. I intend to keep working with the president on those better options.”

Heritage Foundation economist Tori Whiting told Business Insider that the move by the Trump administration represented a “tremendous misstep” that would harm American companies.

“Sixteen per cent of our steel imports come from Canada, our closest neighbour. Roughly 60% of our aluminium imports come from Canada, our closest neighbour,” Whiting said. “And that’s not only going to reduce supply of those products for manufacturers here in America that use them in their production, but it’s also going to result in the prices for those products increasing even more domestically – not just for those companies that buy imports but also for companies that buy domestically.”

“I think that anytime you are imposing tariffs on your friends, it’s a poor move, especially when we want these other countries to help us with China,” Whiting added. “And dealing with trade complications between the US and China, we want the EU and Canada and Mexico to help us with that. So I wouldn’t necessarily say that this is the beginning of a trade war. … But I would say it’s not conducive to maintaining a long-term relationship with those countries and having them help us in other areas of trade.”

Other tariffs, like one Trump is considering on foreign cars, caused similar levels of concern in Washington.

“The announcement that foreign automobiles might be subjected to similar tariffs does not bode well for the economy or for the Trump economic record,” wrote American Enterprise Institute Resident Scholar Benjamin Zycher in a Wednesday op-ed for National Review. “Because there is no obvious limit on the national-security rationale for protectionism, this policy will engender substantial uncertainty in the economy.”

The decision by the White House comes after the initial tariffs announcement caused a stir among lawmakers, who pleaded with administration officials to take a more lenient approach when including American allies.

Republicans have felt unease about the tariffs for much of the year. Republican Study Committee Chairman and North Carolina Rep. Mark Walker told reporters in March that harsh trade policies like tariffs could damage an otherwise stellar economic record from Republicans.

“I still think that several of us, as well as others, are continuing to communicate that we want to see this economic recovery continue to go and we feel like any potential trade war would dissipate that momentum to some degree,” Walker said. “So that’s what we’re concerned about.”

But there is no sign Congress is willing to act on their frustrations, which leaves major trade policies to the Trump administration.

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