The top economic adviser to President Donald Trump, National Economic Council Director Gary Cohn, announced his resignation on Tuesday as the U.S. appears set to trigger a trade war with its key partners by imposing a 10% tariff on all aluminium imports and a 25% tariff on steel.
Mr. Cohn has been the principal voice of the globalist, pro-trade bloc in the inner circle of Mr. Trump and his exit emboldens the protectionist group that the President instinctively favours. The President has announced that he would be going ahead with the tariffs, ignoring Mr. Cohn’s warnings. A lifelong Democrat and a former executive of Goldman Sachs, Mr. Cohn has been the architect of the new tax code passed recently that handed out massive tax cuts for American corporations.
Trade agenda
Peter Navarro, a protectionist economist and director of White House National Trade Council, is leading the trade agenda of the Trump administration, in coordination with Commerce Secretary Wilbur Ross. Another globalist in the White House, the President’s son-in-law Jared Kushner has his wings clipped due to a recent downgrading of his security clearance. Kenneth Juster, who was international deputy to Mr. Cohn and another key pro-trade figure, moved out last year as Ambassador to India.
Mr. Navarro’s focus over the recent years has been trade deficit with China, but the impending tariffs are likely to hit Canada primarily, which is the biggest exporter of aluminium and steel to the U.S. Brazil and South Korea are the other two countries that will be hit badly. Only 3% of steel imports and 6% of aluminium imports to the U.S are from China. It’s not clear whether certain countries or regions will be excluded from tariffs, as being suggested by some. Mr. Trump is planning to invoke section 232 of the Trade Expansion Act of 1962, which allows trade restrictions in the name of national security.
Mr. Trump had repeatedly promised to revive American manufacturing during his 2016 campaign, but the likely economic impact of tariffs on aluminium and steel remains dubious. Steel and aluminium are key inputs in manufacturing and an increase in their prices may adversely affect automobile and several other sectors. Many sectors, including aluminium companies that import sheets to make products such as beer cans, have asked the President to not go ahead with the plans.
China, the EU and Canada have also warned of retaliatory tariffs if the U.S. imposes tariffs, raising the possibility of an all-out trade war that may have a ripple effect across the globe.
