There's a Risk to Using Tariffs as Diplomatic Hammer
By Dan Markham
on Jun 11, 2019
The past two weeks gave a brief scare to supporters of the passage of the United States-Mexico-Canada Trade Agreement. The deal, which looked certain to be approved once steel and aluminum tariffs were removed from Mexico and Canada, was suddenly back in limbo.
President Donald Trump’s threat to impose increasing tariffs on Mexico over the country’s handling of Central and South American migrants heading toward the U.S. border was ultimately resolved without the need for economic action. But not before causing a bit of a stir in Washington, as well as inside manufacturing operations and other private enterprises.
Since March of last year, tariffs and trade have been the dominant storyline for the steel and aluminum industries. Yet even the benefits of the levies, such as they are, come with a cost. The constant threat of tariffs or the possible end to existing tariffs make business planning exceedingly difficult.
There are few things that commodity metals buyers loathe more than uncertainty. Injecting it into the macroeconomy, particularly when dealing with issues unrelated to business, carries some cost.
Tariffs may have a place in any economy’s well-being. But use of them should be judicious, and not routinely employed or threatened in pursuit of other aims.