MEMORANDUM on Trump

MEMORANDUM

To: Donald Trump, President

From: Adeline Tavarez, Student

Date: March 8^th, 2018

Subject: Memorandum on US policy on Tariffs

Introduction

            March 1^st, 2018 President Donald Trump made an announcement that he will be imposing tariffs of 25% on steel and 10% on aluminum. Despite understanding the consequences imposing tariffs can cause to the US, he insists that by next week this will go into effect. This memo will work to advise Trump and his administration why imposing tariffs might serve to harm US international relations, while also threatening the global market. 

Context

            President Trump welcomed the beginning of March with a new announcement. He announced that he would impose tariffs on imported steel and aluminum. According to Trump, America has been “decimated by decades of unfair trade and bad policy with counties from around the world.” In other words, he believes we have been taken advantage of. Although Trump has not confirmed the exact amount of the tariffs, he has indicated steel imports up to 25%, while aluminum would be 10%.

            To understand the magnitude of why some economist and historians are up in arms about this situation, we need to backtrack. First, what are tariffs? Tariffs are essentially a tax on imports, either to make money or protect an industry from competition. Trump is focusing on both of these aspects when he made his announcement. This falls into his foreign policy of putting “America First.” He wants to protect domestic industries and raise revenue. By imposing these tariffs, he wants to level the playing field between the US and other countries, while also encouraging domestic spending. The hope is that as steel and aluminum from other countries get more expensive due to the new taxes, more businesses will turn to American steel and aluminum makers to fill the demand.

Task

            Before going up in arms, about why this might not be the best move for the US, we need to consider one big thing. That is, Trump and his administration haven’t fully come out with all the details about imposing these tariffs. It is vital that Trump considers alternatives to this potential decision. We need to consider the consequences that could arise if Trump were to impose a 25% tax on steel and a 10% tax on aluminum. How will this affect the global market? How will this affect domestic industries? Retaliation has been a topic that economist has argued, ever since Trump’s announcement. My task is to advise Trump and his administration the consequences that imposing tariffs could bring to the US before retaliation becomes a reality.

Solutions

            So my solution is to outline to the administration why imposing tariffs could do more harm than good. Essentially, the best way to win a trade-war is not to start one. I’ll be doing this by outlining different circumstances and showing supportive evidence of how tariffs have not worked in the past. To begin, according to Trump, current American industries will be able to sell and make more steel, if the price for goods increase from other countries. However, Trump fails to realize that domestic steel will increase as well. The US economy relies heavily on the use of steel. Meaning, imposing tariffs on steel and aluminum on imports, will raise it domestically. The demand for steel and aluminum will see an increase, and it will be difficult for American industries to solely take on that demand. Additionally, the imposing of tariffs has been tried before and not been as successful as it was hoped.

Evidence

            Back in 2002, President George W. Bush imposed a tariff on foreign steel. In his endeavor to save the steel industry, he lost many jobs. Many of the US trading partners felt the need to retaliate. President Bush imposing tariffs set off a chain reaction. The European Union, along with Japan threatened President Bush to impose their own tariffs on American products. On the other hand, many other countries debated the tariffs at the World Trade Organization. They argued that the US was violating trade agreements. Likewise, since Trump’s announcement, the European Union has threatened once again to impose tariffs of their own. This time they tend to hit home with tariffs on Harley-Davidson motorcycles, bourbon whiskey, and Levi’s jeans.

Implementation

           

            Despite that President Trump wants to increase employment, increase domestic spending, and protect the US from competition, perhaps the imposition of tariffs isn’t the best road to go down. Although one can recognize and agree that ending unfair trade is necessary, tariffs up to 25% won’t aid the cause. The only way to fall into his foreign policy mission of “America First”, would be to not go into a trade-war, because overall we would see more harm than good. Domestic steel and aluminum products would increase in price domestically as well. Despite the increase in some jobs, overall it would hurt global trade market and damage our relationship with our allies. Overall the cost of tariffs outweighs the slim benefits.