Five reasons why trade wars aren't easy to win - BBC News

Five reasons why trade wars aren't easy to win
By Natalie Sherman
Business reporter, New York
3 March 2018

What happens now that President Donald Trump has said he will move forward with tariffs on steel and aluminium products?

Analysts are warning of a trade war, as officials from Europe, Asia and Latin America threaten retaliation.

Mr Trump predicted it would be "easy" for the US to win.

But most economists and trade experts reject that view, saying every country, including the US, stands to lose in the event of a serious trade fight.

"If what we're talking about is who gets hurt the least, that would probably be the United States, but all countries get hurt in a trade war," says Edward Alden, senior fellow at the Council on Foreign Relations.

Here's why "winning" might not be so easy for the US.

1. Tariffs may not actually boost steel and aluminium jobs much

The United States Steel Corporation plant in Clairton, Pennsylvania
Mr Trump promoted his decision as a win for the steel and aluminium industries and said he expects investment and hiring to follow.

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But technological changes have made the industry less labour intensive. Historians say previous efforts to protect steel jobs have been largely ineffective.

The companies present at Mr Trump's announcement did not respond to BBC inquiries about potential expansions.

A 2002 analysis by the Peterson Institute for International Economics of proposed tariffs predicted the measures would "save" just 3,500 jobs.

2. Tariffs are likely to raise costs in the US

Companies that use aluminium and steel, like brewers, are worried about higher costs
Today, the steel industry estimates that it employs about 140,000 people - far fewer than in the sectors that rely on it.

Criticism of the tariffs from those firms was immediate. For example, the National Retail Federation blasted it as a "tax on American families".

US Commerce Secretary Wilbur Ross said companies were over-reacting, but Mr Alden says the economic costs will be serious.

The Charlotte Observer reports that Electrolux, manufacturer of washing machines and cookers, has already put on hold an expansion planned for Tennessee.

3. Tariffs could hurt allies and prompt retaliation
Individual industries and countries - especially places that are already negotiating wider trade deals such as Canada - will be lobbying furiously in the coming days for exemptions from the final tariffs.

Absent that, analysts say they expect retaliation - and a broader weakening of the global free trade system.

Countries could complain to the World Trade Organisation, but such cases take years and Mr Trump has been dismissive of that body.

Moreover, WTO judges may be hesitant to second-guess the rarely used "national security" rationale the US has used to justify the tariffs, says Columbia Law professor Petros Mavroidis.

Those factors make unilateral retaliatory tariffs more likely, he says. Such actions, which are expected to target industries in politically sensitive US states, could be in place within a year, he says.

4. China has options

The US blames China for flooding the market with cheap steel and aluminium and has already stepped up protective measures against Chinese steel products.

Mr Trump says wider tariffs are necessary to stop Chinese steel appearing in the US via other countries.

But US businesses, including those in the car, tech and agriculture industries, are eager to get into the Chinese market, giving leaders there some leverage.

5. The domestic political consequences are unclear

Mr Trump isn't unique among US presidents in using trade policy to protect politically strategic industries.

But how beneficial such actions are is difficult to decipher, given the time lag between the decisions and elections, says Kenneth Lowande, a research fellow at Princeton University's Center for the Study of Democratic Politics.

At the moment, Democrats are among the most vocal defenders of the president's trade policy.

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The move reportedly divided White House advisers, while congressional Republicans, who generally support free trade, have been sharply critical.