Financial Post: Tariffs Set Dangerous Precedent

The Trump administration announced a plan to impose tariffs: 25 percent for steel imports and 10 percent for aluminum. There are many unknowns including exemptions for allies and close trading partners or certain products. The plan relies on Section 232 of the Trade Expansion Act of 1962 and World Trade Organization rules which allow blocking imports for national security purposes: “The World Trade Organization gives wide licence to countries to invoke trade measures for national security reasons, but WTO members have rarely done so,” writes Joe Chidley. He expects other nations to retaliate, the US to respond in turn, with stalled trade, reduced global growth, higher prices and eventually a recession – all at a difficult time for central banks which are trying to normalize monetary and fiscal policies. Even worse than economic challenges, the ruling sets a dangerous precedent, Chidley warns. The global economy has come to depend on supply chains and reliable trade partners, and the markets could respond in unexpected ways. The resignation of Gary Cohn, a respected US economic adviser, only adds to the uncertainty. Chidley concludes, “The floodgates on bad trade policy are now wide open.” – YaleGlobal