President Trump’s plan to impose a 25 percent tariff on foreign producers of steel and 10% on aluminum have received a lot of criticism from politicians, policymakers, and economists, but one analysis says the commander-in-chief’s basis for the tariffs — national security — is correct.
“In wartime…aluminum and steel are essential to make tanks, planes, and other weapons. The aluminum and steel industries are in dire straits, with many plants idle or operating far below capacity while cheaper metal flows in from other countries,” writes Betsy McCaughey, a former lieutenant governor of New York and ex-wife of Wilbur Ross, Trump’s secretary of Commerce.
She argues that the biggest suppliers of aluminum and steel targeted by the tariffs — Brazil, Russia, South Korea, and Turkey — cannot be counted on during wartime to supply these vital raw materials to the American war machine.
McCaughey noted that analysts have concluded that the Pentagon’s steel and aluminum needs only amount to about 3 percent of U.S. steel and aluminum production, but that’s during peacetime. She pointed out that during World War II, U.S. steel and aluminum needs soared more than 200 percent.
The former Lt. governor also explained that U.S. steel manufacturers are currently operating plants at only about 74 percent capacity, which leads to higher costs. She said that ramping plants up to 100 percent capacity — as well as adding new plants and re-starting shuttered plants — will also lead to more U.S. steel and aluminum supply at a reduced cost and more American jobs. [source]
Analysis: Without getting too far into the Washington weeds here, there isn’t any doubt that a big part of Trump’s decision to impose these tariffs is political in nature. He promised this on the campaign trail; he also promised to restore American industry, jobs, and the economy, all of which is occurring under his policies.
But economists and detractors have a point as well in that it will take time to reinvigorate American steel and aluminum manufacturing, some products of which are no longer made in the U.S. at all and must be obtained from foreign suppliers including Russia. That likely will result in short-to-midterm price increases for those products.
That said, there is no disputing Trump’s national security argument. While some believe that the next great-power war will immediately go nuclear, negating the need for ramped up production of military hardware, there is no hard evidence to support that. It could very well be that great powers would not resort to nuclear weapons for the same reason they haven’t been used yet — mutually assured destruction. Granted, in matters of national sovereignty, Putin and Xi would threaten and likely use nuclear weapons. Trump would do the same thing.
But short of nuclear war, McCaughey is correct in that the Pentagon’s demand for more raw materials for its war machine could be dramatically undermined in a major power war. And foreign sources of steel would become a military target in order to disrupt U.S. war production. Trump’s tariffs are a political and economic gamble, for sure, but one that will eventually pay off in terms of greater domestic manufacturing capacity of vital national security commodities.