Michael Hudson On Trump’s Plan to Impose Steel & Aluminum Tariffs
Video and Transcript By Democracy Now
This is a rush transcript. Copy may not be in its final form.
JUAN GONZÁLEZ: “Trade wars are good, and easy to win.” That’s the message President Trump tweeted on Friday, sending shockwaves across the globe and sparking fears of impending economic volatility. On Thursday, world stock markets tumbled after Trump announced he’s imposing new tariffs on imports of foreign steel and aluminum. The new tariffs—25 percent on steel and 10 percent on aluminum—will benefit U.S. producers of the metals, while raising prices for companies that manufacture everything from cars to airplanes to high-rise buildings.

AMY GOODMAN: Prominent Republicans and business leaders have denounced Trump’s plan, saying the tariffs will hurt the manufacturing industry and U.S. competitiveness. House Speaker Paul Ryan said in a statement Monday, quote, “We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan.” Trump’s announcement has also prompted concerns that other countries will impose retaliatory tariffs while challenging U.S. protectionism at the World Trade Organization. On Monday, President Trump told reporters he was not going to back down on his plan to impose new tariffs.

PRESIDENT DONALD TRUMP: Thank you all very much. I appreciate it. Thank you. Thank you very much.

REPORTER: Paul Ryan wants you to back down on trade. Paul Ryan says he’s worried about a trade war. Are you going to back down on the tariffs?

PRESIDENT DONALD TRUMP: No, we’re not backing down. Mexico is—we’ve had a very bad deal with Mexico, a very bad deal with Canada. It’s called NAFTA. Our factories have left our country. Our jobs have left our country. For many years, NAFTA has been a disaster. We are renegotiating NAFTA, as I said I would. And if we don’t make a deal, I’ll terminate NAFTA. But if I do make a deal which is fair to the workers and to the American people, that would be, I would imagine, one of the points that we’ll negotiate. It will be tariffs on steel for Canada and for Mexico.

So, we’ll see what happens. But right now, 100 percent, but it could be a part of NAFTA. And I understand—I just got a call from the people who are right now in Mexico City negotiating NAFTA. Mexico, and really Canada, want to talk about it. But if they aren’t going to make a fair NAFTA deal, we’re just going to leave it this way. People have to understand, our country, on trade, has been ripped off by virtually every country in the world, whether it’s friend or enemy—everybody—China, Russia, and take people that we think are wonderful, the European Union.

JUAN GONZÁLEZ: Trump’s announcement on tariffs, however, has garnered enthusiastic support from some top Democratic lawmakers and labor unions, who say the tariffs will help long-struggling steel and aluminum workers compete in an increasingly difficult global economy. This is Democratic Ohio Congresswoman Marcy Kaptur speaking to Fox News.

REP. MARCY KAPTUR: We understand the delicate nature of tariffs, but we know America hasn’t had a trade balance in over a quarter-century. Right now, over 700 workers in Lorain, Ohio, have been pink-slipped, unless something happens very soon. We know we have to resurrect this steel industry in our country to give it a fair trade, level playing field. I think the president is inching toward that. He’s at the scrimmage line. We look forward to the details. But I can tell you what we don’t want is an America without a steel industry, an America that is subject to predatory practices by countries like China, like Russia, even like Vietnam, that backdoor goods into this country and cause great job loss here and corporate collapse. We need to have a level playing field.

AMY GOODMAN: That was Democratic Ohio Congressmember Marcy Kaptur supporting Trump’s tariff plan.

Well, for more, we host a debate today on the debates—on the impacts of Trump’s tariffs—who they’ll help and who they’ll hurt. In Washington, D.C., we’re joined by Lori Wallach, director of Public Citizen’s Global Trade Watch and author of The Rise and Fall of Fast Track Trade Authority. Here in New York City, we’re joined by Michael Hudson, the author of America’s Protectionist Takeoff 1815-1914. He’s professor of economics at Peking University in Beijing and at the University of Missouri, Kansas City. Hudson’s most recent book is titled J Is for Junk Economics: A Guide to Reality in an Age of Deception. We’re going to speak with Lori Wallach and Michael Hudson after break, and then we’re going to turn to Democratic Senator Chris Murphy. He is the senator from Connecticut. He was a congressmember when the Sandy Hook massacre took place. And now he’ll talk about what he feels the prospects are for gun control in the U.S. Congress. This is Democracy Now! We’ll begin our debate with the tariffs in a moment.


AMY GOODMAN: “Steel and Glass” by John Lennon. This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman, with Juan González, as we turn to a debate on the impacts of President Trump’s proposal for tariffs—who they’ll help, who they’ll hurt. In Washington, Lori Wallach is with us, director of Public Citizen’s Global Trade Watch, author of The Rise and Fall of Fast Track Trade Authority. Here in New York, we’re joined by Michael Hudson, author of America’s Protectionist Takeoff. He is professor of economics at Peking University in Beijing and at the University of Missouri, Kansas City.

Lori Wallach, let’s begin with you. Were you surprised by President Trump’s announcement? And where do you stand?

LORI WALLACH: I wasn’t particularly surprised, though the question is whether he’ll follow through. It wasn’t managed in the most artful way.

And where I stand on it is, this is an enforcement action similar to what’s been done fairly systematically, not only in steel. There are hundreds of these kinds of orders outstanding. Because President Trump is generally despicable, he’s getting piled on, and a huge attack by a lot of folks who want to and have been trying to declare a “trade war” is going to be started by him, when, in fact, in 2002, President Bush did the same thing, only with 30 percent steel tariffs.

And here’s the background of it. There is a systematic overproduction of steel in the world because other countries subsidize. We’re one of the most free trade, open countries, so we end up as the “buyer of last resort.” So we get flooded with the subsidized, overcapacity steel. Just in the last number of years, over ten—sorry, 100,000 workers, mainly union, in these industries have lost their jobs.

So what we’re doing now is nothing that’s particularly high-tech. You know, it’s not coming from Wakanda, it’s coming from our trade laws. We’re putting a shield up to basically bounce off all this incoming, to basically say, “Basta! We are not buying this stuff, you guys, really.” For 10 years we’ve been talking to all these countries, saying, “Stop subsidizing. Stop dumping all this stuff on us,” and they’ve totally ignored us. So, now we’re doing this sort of trade two-by-four. It’s temporary. This is not the new tariff, but it’s sort of a “Yo! Slow down. We were talking to you. You didn’t listen.” And so now there will be a temporary block, where we bounce this stuff off. And the rest of the market, all the other countries, have to basically stop oversupplying, stop subsidizing.

JUAN GONZÁLEZ: Michael Hudson, you’ve got a distinctly different perspective. Your view on the Trump announcement?

MICHAEL HUDSON: Well, in many ways, what she said is correct. But America has always been the most protectionist country in the world for itself. It wants free trade for other countries. And Lori is quite right when she sees there’s a disconnect between what economists say and what politicians actually do. International trade theory is probably the silliest branch of modern economic theory. It’s just a mass of assumptions. And if what the textbooks say were true, America never could have become the major manufacturing power. Britain couldn’t have. Germany couldn’t have. Every country that is an industrial power has got rich by subsidizing its industry and pursuing a protectionist policy.

However, what Trump is doing is the opposite of all the protectionist logic that every country has followed. The whole idea of protectionism is to increase your expensive, high-technology manufactures by getting low raw materials. Trump is doing the opposite. But he’s raised aluminum prices by 40 percent in the last month, 60 percent since the summer. Steel prices are up 33 percent. So, this is going to squeeze the prices that manufacturers have to pay that make things out of aluminum and steel. There’s no increase in tariffs on buying foreign tin cans or foreign steel products, so the American manufacturers will be squeezed.

But foreign countries now have a great benefit. Germany, China, other countries are thinking, “Now, under the rules of international trade, when there is an illegal tariff put on, we get to retaliate.” And they’re going to look around and say, “What do we want to respond to? What is the major American competition that we want to knock off the table?” And they’re going to put tariffs on whatever they think the competition is, whether it’s Boeing airplanes or bourbon or blue jeans or other things.

So, what Trump’s policy does is a travesty of protectionism. It merely squeezes. And the pretense of all of this is that if he gives more money to the steel and aluminum companies, they’ll invest more and hire more labor. But they’re not going to do that at all. Not a single new steel factory is going to be built. Not a single new aluminum factory, because aluminum is made out of electricity, and America is a high-cost electricity country, compared to Iceland, where Alcan produces much of its aluminum, in Canada. So, what you’re doing is enabling the steel and the aluminum companies to use their increased profits for share buybacks and to pay dividends, but they’re not going to build new factories. There is not going to be any trickle down. So, Trump has made a travesty out of protectionist doctrine, as well.

AMY GOODMAN: Lori Wallach, your response?

LORI WALLACH: Well, first of all, there’s actually empirical research on this, because when Bush did what he did in 2002 with the 30 percent tariffs, the same exact alarms went off: Prices will go up, global catastrophe, trade war. And, in fact, the U.S. International Trade Commission, the official economists and trade experts of the U.S. government, did a very detailed study, which folks can see on the ITC’s website. It was published at the end of 2003. And what they found was that, actually, prices didn’t jump up for the users of, in that case, steel—because aluminum wasn’t covered. But rather, there was an increase in general welfare, which is to say, as president—sorry, as Professor Hudson has laid out, the way he’s talking about it is as if these tariffs were a permanent policy. This is a temporary sort of trade policy two-by-four to readjust the market. And so, in fact, what will happen, what did happen in 2002, is, right away, the U.S. steel mills and the aluminum foundries will start to rehire the people who they have laid off. A bunch of steel mills have closed, but a lot of other ones have just laid people off. And so, those guys are going to start rehiring.

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As far as the prices, in fact, the study by the ITC showed there isn’t a big jump. But folks need to sort of think through how this will work in the next year, 18 months, that these tariffs would be in place—again, if Trump follows through. And that is something that my little young nephews, Jake, Sam and Noah, knew before they got into high school, which is, if, for instance, their can of soup, which is the can of steel—if that whole can of soup, let’s just say, was a dollar, the amount of actual steel in there is less than a penny. The can can be bought, produced for about five cents. So let’s just assume 25 percent increase in the price of steel, which is not what happened any time this has been done before. It’s a fraction, tiny, pennies, of increase for a can of soup. We’re not going to see a huge jump. And you see companies like GM, one of the biggest user industries, basically saying, “We need a domestic steel and aluminum industry in our country. We are for trade policies that actually will make our country have a manufacturing sector.” So, I think a lot of the way this was announced was very sloppy, and there has not been a very good management of sort of the information around it. But using these kind of short-term measures is what every country does, which then gets to what Professor Hudson said about what happens.

This ain’t gonna be a trade war. There’s a lot of huffing and puffing. But the reality is, the way you respond to this—because, by the way, lots of other countries do the same thing. We’re one of the countries that never does. That’s why we have all the excess steel coming to us. Other countries have already done the “ixnay, you can’t send it here” measures. And what you do when you think it’s unfair is you go to the WTO, and there’s a process. So, for instance, when Bush did what he did in 2002, that process played out over about two years. At the end of the period, the WTO said, “You can’t do that,” at which point then the other countries are allowed to put up sanctions. But this is not a [snaps] boom, right away. We’re protesting the same kind of, let’s call it, enforcement actions—it’s a technical matter—that other countries have taken at the WTO, and then the WTO looks at the rules and says, “All right, this is kosher, this is not.” In this case, because it’s based on almost a year of research, because this is about national security, and the WTO has a national security exception, this action might actually stand for the U.S., whereas the steel action was based in a different part of the trade law and was ruled to be a WTO violation.

JUAN GONZÁLEZ: So, in essence, what I’m hearing from Lori, she’s seeing this more as a political action, not a long-term economic policy, to basically get some of the other countries to pay attention and to negotiate better relations in terms of trade. But, Michael Hudson, this whole issue of the kind—where we’re putting the tariffs on—clearly, the United States has monopolies in some areas, that other countries could retaliate against. I’m thinking, for instance, the pharmaceutical industry, the patents and copyrights that are so essential to the pharmaceutical and biotech industry. Even doctors, medical doctors, are protected in the United States from foreign competition. Could you talk about the choice of steel and aluminum versus these other industries?

MICHAEL HUDSON: Well, you’re right. It is political more than economic. There’s not much of an economic justification, despite what Lori says. She’s right when she says the price of steel cans is not going to go up. But the cost of steel will go up for the steel can manufacturers. So, they’re going to have costs go up a little bit, and their profits will be squeezed somewhat. The profits will be up for steel and aluminum. I don’t think there’s going to be much of a hiring.

And I think there’s another factor here, the fact that Trump is breaking the trade agreements, just as he was—America was trying to push forth the Trans-Pacific Partnership and other trade agreements, that Lori has been very good at criticizing. And, in fact, she should be overjoyed—I’m sure she is—at Trump’s action, because he wrote this wonderful book, The Art of Breaking the Deal. I think the publisher called it The Art of the Deal. But he made all of his money by breaking deals, which is why nobody will deal with him. The suppliers won’t deal with him in New York, because he’ll make a deal: “I’m going to pay you this much for what you supply for the hotel.” Then it comes time to pay: “Oh, I didn’t like it. I’m going to pay you 50 cents on the dollar.” He screwed his suppliers, his manufacturers. The banks won’t deal with him.

This kind of businessman’s behavior—that is how businessmen make money, by breaking deals—it doesn’t work that way internationally. The international economy is so strained right now. And even though Hillary backed the steel tariffs, just as much as George Bush backed them—she supported them at the time—the situation has changed, and the Europeans are much more reactive and protectionist these days, and the Asians are also, because they’re going to be hurt, but most of all Canada. Canada is the major supplier of steel and aluminum to the United States. That’s the politics that’s involved.

Now, imagine what this is going to do right at the time that NAFTA is being renegotiated, ostensibly, by Trump. For one thing, Trump has said to Canada and Mexico, “Any deal we make, we can break any time by saying 'national security.'” National security means anything, because everything is plugged into everything else. It’s all a system. And you could say that protecting doctors, you could say the pharmaceuticals—anything—is national security. So what that means is, we have an out. Free trade for you. We can always protect what we’re doing for national security. And you’re only Canada and Mexico. What are you going to do about it?

AMY GOODMAN: And, Professor Hudson, the response in China right now? You’re a professor at Peking University. You also taught in Wuhan, China. We are sitting here with your books, your textbooks, in English and in Chinese.


AMY GOODMAN: The response there?

MICHAEL HUDSON: Well, there is a war over who is going to control the highest-technology products. And the response to America’s steel and aluminum tariffs will be asymmetrical. China is only the 11th-largest supplier of steel to America, not a major supplier at all. The steels that are important to America are specialty steels, German steel and Japanese steel especially. American companies don’t make that kind of steel. There’s no way that they can hire more workers and make more plants to provide the kind of specialty steels that we’re getting from Germany and Japan. So, not all steel is the same. It’s going to be a—the politics are going to be very interesting.

JUAN GONZÁLEZ: And, Lori, I wanted to ask you—we only have about a minute for this segment. You were mentioning the claims of a trade war are inflated, but Trump himself has tweeted that trade wars are good, so he’s actually stoked the ideas of a trade war.

LORI WALLACH: I think we can all agree that President Trump is despicable and has not—I just don’t know how else to say this—is not the most intelligent when it comes to his policy or political statements. However, that being said, the reality of how this is likely to play out is not categorically different than how it plays out every time every other country puts up this kind of a measure.

And, Professor Hudson, I want to have a bet with you—I think we should have lunch, whoever loses pays—because I will bet that, in fact, in short order, if the president follows through and puts these tariffs in place, then there will be a rehiring of a lot of the shifts that have been stopped in aluminum and in steel in the last 18 months, because it is true that, right, on a daily basis, we’re not importing, say, from China, but it’s a global market. So, when China is oversupplying, when Russia is way oversupplying, when Korea is, who picks up the particular steel from the other country cascades. So the fact that at the moment it’s not coming from China does not mean that the reduction of the total supply that this kind of two-by-four policy tool will result in won’t have the outcome of creating more jobs. That said, the key thing is—

AMY GOODMAN: Five seconds, Lori.

LORI WALLACH: —this does not a trade policy fix make. This is an enforcement action on one specific problem. The—

AMY GOODMAN: Lori, we’re going to have to leave it there, but I hope that we can film the lunch. Lori Wallach, director of Public Citizen’s Global Trade Watch, and economist Michael Hudson, professor of economics at Peking University in Beijing and the University of Missouri in Kansas City.

The views and opinions expressed in this article are the author’s own and do not necessarily reflect those of Information Clearing House.

- See Also -

In case you missed it: EU ups import tariffs on China steel: The European Commission explained it had set final duties of between 18.1 percent and 35.9 percent for five years for producers including Bengang Steel Plates, Handan Iron & Steel and Hesteel.

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