Abandoned building at Hunters Point Shipyard, San Francisco, USA. / Photo by Dllu, CC BY-SA 4.0 license.

US president Trump’s proposed trade barriers and the long decline of the US economy

US president Donal Trump has announced that he intends to introduce new trade barriers during a speech at a 1 March meeting with representatives from that country’s steel and aluminium industries. The president complained that steel and aluminium production as well as related industries such as that of automobile production have suffered in his country. He complained that automotive plants have moved to Mexico, that other countries have been dumping products into the US market and outperforming domestic suppliers. The president and industry representatives stated that the result has been job loss and preference of imported goods over those nationally produced. China was the country most regularly mentioned as the beneficiary of this situation. The North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) were also identified as culprits. The solution provided was tariffs. “We’ll be imposing tariffs on steel imports, and tariffs on aluminum imports,” he said. “Twenty-five percent for steel. It will be 10 percent for aluminum. And it will be for a long period of time.” The president said that he intends to have the new tariffs ready in short order, a week after the speech was given.

The announcement was made while Chinese president Xi Jinping’s top economic advisor was in Washington with the mission to establish an economic agreement between the two countries. Liu He made his arrival to the US on 27 February, weeks after foreign minister Yang Jiechi had made a similar visit to Washington in order to discuss trade issues. The unveiling of the tariffs while the Chinese envoy was yet in the country is a strong statement of rebuke, an insult and atmosphere of exceptionalism that may or may not lead to actual implementation. Further to the tariffs, the day of Liu’s arrival, the US Department of Commerce ruled against China on the matter of aluminium foil imported from that country. “[E]xporters from China sold aluminum foil in the United States at 48.64 to 106.09 [sic] percent less than fair value. Commerce also determined that China is providing unfair subsidies to its producers of aluminum foil at rates of 17.14 to 80.97 percent,” according to the decision . They ruled that “[a]s a result of today’s decisions, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of aluminum foil based on the final rates.”

A 2017 OECD report on steel production and consumption mentions that current trends for steel production are heavily influenced by expectation of large scale infrastructure projects around the world. Currently, the largest and most famous of these are within China, or led by China via its international Belt and Road Initiative (also known as the New Silk Road). China has radically transformed the landscape of its built environment. In less than a decade, that country has built 20,000 km (12,500 miles) of high-speed rail. They now have more of such railways than the rest of the world combined. Furthermore, there’s been a dramatic urbanisation project that’s seen the creation of completely new cities of enormous scale or the transformation of existing cities. For this reason, China has produced and consumed a very large amount of steel, aluminium, and other materials such as cement. From 2011 to 2013, that country used more cement than the US did over the past 100 years. If you consider the impressive past construction projects of the US, such as the buildup of New York City, or the now old highways, roads and bridges that criss-cross that country then you may get an impression of the immensity of the work that’s been undertaken in China. The Belt and Road Initiative, meanwhile, is an infrastructure development project whose target is a multitude of countries throughout Asia, Africa, and Europe.

The world’s largest steel producers are China (67,047 thousand tonnes per month), India (8,796), Japan (8,719), the US (6,760), South Korea (6,124), Russia (5,930), and Germany (3,600). According to a December 2017 report by the US Department of Commerce, the US imports most (78%) of its steel from just ten countries. These are Canada (16%), Brazil (13%), South Korea (10%), Mexico (9%), Russia (9%), Turkey (7%), Japan (5%), Taiwan (4%), Germany (3%), India (2%). At least in the case of steel, a restriction on imports will not have a significant effect on China.  Key allies of the US are rather the most prominent in the list, and so they’ll be the ones most affected. From this we can see that, if tariffs on steel are actually implemented, the US would potentially undermine its trade and diplomatic relationships with its allies, further eroding its self-crafted role as leader of a vast collective of partnered and subordinate countries around the world. It’s understandable that there may be a wish to improve the national economy: apart from the military, their productive economy has been floundering while the financial and speculative capital sectors have been growing. This has introduced a vulnerability to the US economy. The US, however, has taken no steps in shifting capital out of speculation and into real production: such as with any meaningful plan to repair and rebuild their failing roads, rail, ports, and cities. The economic decline of the US is not a recent affair. According to John Bellamy Foster, well known author of The Theory of Monopoly Capitalism, a landmark instance that signaled the diminishing economic health of that country “was the business trough of 1975, during which approximately 25 percent of productive capacity was idle.” The situation is not much different today, while factories are aging, the next generation of workers are increasingly inexperienced due to a lack of high-skills work, education facilities are lacking, and social inequality widens at an alarming pace.

Given that China will not be affected by the tariffs despite the fact that they were singled out as a primary target, the question remains, what is the announcement for? Interestingly, the very mention of introducing trade barriers can help to normalise the notion of such an approach among like-minded political parties and governments in other countries. The European Union is an economic bloc that centralises monetary policy, has open movement of capital, and limits members’ national sovereignty on trade issues. Perhaps an announcement such as president Trump’s could embolden beleaguered countries and nationalist governments on that continent to further challenge the liberal political and economic order from within the association.

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