President Trump, using a 1960s Act which gives the President rights to protect national security, to argue for tariffs on steel and aluminium imports into the US seems a stretch but the implications to world trade if carried out are very serious. Much more serious than Russian sanctions or a hard BREXIT.
Trump threatened in the 2016 campaign to introduce tariffs but it was assumed this was kicked into the long grass when he asked for a commission to report on the issue last year. However, to people's surprise, the report supported a tariff and President Trump seems determined to follow through on his campaign promise.
At a time when the OECD and World Bank's projections show sustained global growth, Trump's announcement could grind those projections to a halt.
With his tax reforms there was already concern that the America First policy could distort global M&A activity, as US companies focus on US domestic M&A but a trade/ tariff war has far more serious consequences. A tit for tat reaction from China or India or indeed the EU will no doubt mean a trade war which could expand into other products and services.
Despite the failure of the Dubai world trade rounds a few years ago, it was assumed a tariff free world could still happen.
Tariffs and, in particular, using national security to create them is a massive threat to globalisation and will hurt not only the so-called cheap imports it is protecting against, but also the business domestically for which the tariffs are there to protect. US domestic steel and aluminium production will become a domestic consumption focus and the rest of the world will be open to non-US companies. History shows the economy of a country without a global trade focus shrinks in the long term.
The use of national security as a means of economic protection is increasingly being used. We see it in France as Ministry of Economy approvals are required increasingly in M&A. We see consents needed or regulations being used to stifle overseas direct investment in China and Latin America to protect local companies. Historically the UK has been a liberal economy and the free trade movement still lives strong from the 1800s. BREXIT mustn't become a route to protectionism. The UK can only survive by maintaining its global trade ethos. The US administration should take heed of history.
Trump steel tariff plan sparks UK backlash and trade war fears