Goldman Sachs thinks President Trump’s decision to impose tariffs on foreign steel and aluminum probably signals an exit from NAFTA.
The 25% tax on steel and 10% tax on alumium would be the most substantial trade restictions to date, notes the bank’s chief economist.
“Unlike routine antidumping and countervailing duty cases or less common safeguard cases, the Section 232 authority the President will apparently use is rarely used and more controversial,” wrote Jan Hatzius, chief economist at Goldman Sachs. “There is a good chance that this could eventually lead the President to announce he intends to withdraw from NAFTA, but such an announcement does not appear likely in the near term.”
The proposal “does not rely on any economic argument and instead proposes trade restrictions on national security grounds,” notes Hatzius – referring to the Commerce Department’s use of Section 232 of the 1962 Trade Expansion Act as a basis for the tariffs.
The Trump admin contends that China and other countries dumping cheap steel and aluminum puts U.S. competitors out of business, thus risking national security.
According to the U.S. Department of Commerce, Canada and Brazil – two key trading allies – were the top sources of foreign steel to the U.S. as of September 2017. China, frequently criticized politically for dumping cheap steel on trade partners, is not one of the top 10 sources of steel to the U.S. –CNBC
In January, Trump announced solar and washing machine tariffs – after he offered some clarification on comments which many thought to be to precede a NAFTA pullout.
“I happen to be of the opinion that if it doesn’t work out we’ll terminate it, but I think you’re doing pretty well, Bob,” Trump said, referring to U.S. Trade Representative Robert Lighthizer.
In January, Reuters noted that Trump does not expect a trade war to result from any new tariffs.
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GS is well known for kicking muppets under the bus and Jan Hatzius of GS is about as credible as Joe LaVorgna of Duche Bank forecasting on clown network CNBC.
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