Trump Says Tariffs Are Needed To Protect Vital Industries, But Are They?
When President Trump announced tariffs on steel and aluminum imports this month, he said protecting the two industries was vital for national security.
"We want to build our ships. We want to build our planes. We want to build our military equipment with steel, with aluminum from our country," he said at a March 8 White House news conference.
In other words, the U.S. military should be as self-sufficient as possible, and not rely on other countries to supply the essential materials it needs for defense.
It's an argument that makes sense at some level, but it also obscures a broader truth about military spending in the global economy: Supply chains have become so complex that it would be virtually impossible for the U.S. military to go it alone.
"Almost any item that you could look at [that] says 'Made in the USA' on it, frequently there is some content in it that comes from overseas," says former Pentagon official Andrew Hunter, now with the Center for Strategic and International Studies.
Trump may want to prop up the aluminum industry, for example, but making aluminum requires bauxite, a material that has become too expensive to mine in the United States, The Wall Street Journal reported recently.
Congress already requires the Pentagon to give preference to domestic manufacturers whenever possible, Hunter says. Certain materials such as stainless steel must be bought from U.S. suppliers.
The reasons are political rather than strategic, he says.
"A lot of that is driven by a pretty simple sentiment, which is [that] when people give their tax dollars to support the national defense, they hope that those taxpayers are being used in a way that also further supports the economy," Hunter says.
Also given preference are certain countries, such as Canada, with which the U.S. has reciprocal trading agreements. In some cases — for example, aircraft made by the Brazilian company Embraer — the U.S. allows products to be partly manufactured overseas, as long as they are finished domestically.
There's another question raised by the president's steel and aluminum tariffs: How necessary are they, really?
To impose them, Trump is implementing Section 232 of the Trade Expansion Act of 1962, a rarely used law that gives presidents great leeway to protect industries deemed vital to national defense.
"The case in 232 is the argument that for national security reasons we need to maintain a high level of production of some particular commodity," says Nicholas Lardy, senior fellow at the Peterson Institute for International Economics.
"One way of doing that is to put on a tariff, which makes imported goods more expensive and makes it more likely that the domestic firms will be able to continue production," he adds.
There's no question steel is an essential part of a wide range of weapons and other goods used by the military, from tanks to battleships.
But as much as the steel industry has shrunk over the years, the U.S. still produces millions of tons of it annually, Lardy says.
"The steel used by the United States military in tanks and all kinds of other uses is a very, very small portion of total production — well under 10 percent. The industry is not in decline in terms of output, so arguing that we need to put on tariffs now to preserve a steel industry that is essential to national security I think is a bit of a stretch," Lardy says.
And in the unlikely event that the U.S. runs out of steel, it has plenty of other places to get it.
Much of the steel imported today comes from friendly countries such as Canada, South Korea, Japan and the United Kingdom, with which the U.S. has strong military alliances.
The Trump administration has temporarily exempted Canada and Mexico from the tariffs and has suggested it may add other countries.
Lardy says the tariffs could invite retaliation by other countries.
"If we're protecting steel, other countries could protect a product they want to protect and say that it's for national security reasons. You're opening the door to this form of protection by other countries," he says.