December 7, 2019

Here We Go Again with the Tariffs

“Just when you think President Trump has reached a moment of trade equilibrium, there he goes again. Mount Tariff erupted once more Monday morning in tweets announcing tariffs on Brazilian and Argentine steel that dampened hope for election-year economic calm.

“Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers,” the President tweeted. “Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.” Where to begin?

It’s hard to know exactly what motivated Mr. Trump’s tweets, and he didn’t say when the Section 232 tariffs would be restored. But he seems to think he can use tariffs as a two-fer to help struggling U.S. steel makers while punishing Argentina and Brazil for displacing U.S. farm exports to China. He’s wrong on every count.

The Argentine peso has plunged 37% this year amid hyperinflation and fears that the Peronists who won the recent election will devalue and walk away from their debt as they have so often. But since the October election, Argentina’s central bank has tightened capital controls and set a price floor under the peso.

The Brazilian real has slid somewhat this year amid broader tumult in emerging markets. But its central bank has intervened to shore up the exchange rate. President Jair Bolsonaro is trying to revive the economy with trade agreements, deregulation, and pension and tax reform. Mr. Trump’s new tariffs will undermine political support for those reforms.”

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