President Donald Trump’s announcement that his administration intends to impose sweeping tariffs on steel and aluminum imports was met by fears that the moves could spark a trade war.
But history suggests that is unlikely.
President George W. Bush in 2002 imposed a stiff 30 percent tariff on most types of steel imported into the United States. Unlike the Trump administration’s tariffs, which are being undertaken in the name of national security, the Bush steel tariff was specifically protectionist. Its aim was to protect American steel producers not from unfair trade practices but to give the steel industry time to adjust to the consequences of rising imports, regardless of fairness.
When that tariff was unveiled, many predicted that it would invite retaliation from major steel exporting nations around the world. But that never came to be. The measures were challenged in the World Trade Organization, but they were not met with retaliatory trade sanctions. Far from signaling the start of an international trade war, the Bush steel tariff was followed by an era of falling trade barriers.
One reason for that is that the Bush tariffs lasted just under two years – shorter than the three years originally announced. In December of 2003, the Bush administration announced that the tariff’s mission had been accomplished. Trump has not put a firm timeline on his tariffs except to say they would be imposed “for quite some time.”
Another reason is likely that trade with the U.S. was too valuable to exporting nations around the world. Jeopardizing their ability to export to the U.S. just to defend their steel exporters simply did not make sense.
That’s even more true today. The U.S. is the largest importer of steel in the world, importing four times more than it exports. And even with the Trump tariffs in place, it will remain a huge importer. Retaliation against your biggest customer is not likely to be viewed around the world as a wise business move.