U.S. to Probe Steel Imports Trade

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Schlesinger, Ballhaus, and Mauldin evaluate the Trump administration's plan to launch widespread hearings to decide whether to limit steel imports in their article "U.S. to Investigate Steel Imports Trade." The administration claims that the decision is needed due to the danger that such transactions may pose to national security. Schlesinger, Ballhaus, and Mauldin, on the other hand, imply that the administration's explanation for the decision could be just a pretext. According to the writers, Trump may be putting his campaign rhetoric of "America First" into action. To achieve this, authors believed that the administration_x0092_s decision was aimed at overhauling the American trade policy. Trump reiterated that economic nationalist as well as the American industries ought to be protected from what he termed as unfair competition from outside world.

The article states that for over last three decades ingredients which may constitute a threat to national security have been much contracted. This means that there have not been enough inputs which may establish a threshold for certain factor(s) to create a threat to national security. As such, the process of determining a threat to national security should apply an expansive approach so as to prevent awkward decisions like the one made by the Trump administration. Even though it is true that steel industry is critical to the economy and military of America, it is also true that no country can thrive on its own without both policy and economic cooperation. Thus, Schlesinger, Ballhaus, and Mauldin state that even though steel industry ought to be protected, curbing imports from foreign partners would cause a backlash from such partners.

Trade restriction in the present era is only served to nations that do not respect human rights, democracy or harbor terrorism activities. What the Trump administration is doing through its American trade policy is tantamount to trade sanctions. The authors observed that the administration is invoking particular trade laws which were being adopted in specific situations before the creation of World Trade Organization. The trade body was developed to dismay member nations from implementing unilateral decisions such as restricting imports. The article explains that previous regimes acknowledged that losing manufacturing capacity to allies provided that key products were available to Americans was not regarded as a threat. This decision was meant to enhance mutual international trade. The new administration belief that creation of a strong manufacturing base leads to attaining adequate national security is misinformed. Strong manufacturing will have numerous benefits such creation of employment, increase in revenue and increase in production in the short run. These will be short-term benefits because at a point the country will need to export the surplus to its allies. However, this may be impossible because its allies will also have applied policy the U.S. applied to them through restricting steel imports.

Theory Review and Analysis

The authors believe that it is most likely that the findings of the probe will culminate on the United States imposing a restriction on importing steel products. The article reports that Sherrod Brown Ohio senator praised the Trump decision as an important step but said it would count for nothing if it is not followed by tough action that addresses China_x0092_s overcapacity. This indicates what many of pro-Trump are thinking. Some of the tough actions are likely to be a restriction of imports and cancellation of certain trade treaties like the NAFTA. Restricting steel imports is probably the starting point before the restriction spreads to other industries in the economy. Schlesinger, Ballhaus, and Mauldin argued that if the Trump administration fulfills its campaign pledges especially those which are based on the new American trade policy, the economy will suffer. Restricting imports and curbing trade deficits will only result in a closed economy. The United States will be perceived as if it is isolating itself from the global market, hence others countries will also avoid its products.

Whether the Trump_x0092_s decision will lead to restriction of steel imports remains to be seen but if his administration indeed restricts the imports, the likely outcome will be. Restriction of steel imports will mean that steel available in the home market will decrease while the consumption of it will increase or remain constant. The resultant will be a rise in demand for steel as well as the steel products. When demand (D) increases, the price (P) of that particular product goes up as well. This will benefit the steel manufacturing firms since their revenue will increase. With surplus revenue, steel manufacturing will undergo significant growth leading to achievement of the objective of Trump administration of developing a strong steel manufacturing base for national security. However, this will come with dire consequences because of the sectors of the economy especially those that use steel products are likely to crumble. This will result from an increase in the price of steel products with no real increase in their purchasing power.

Schlesinger, Ballhaus, and Mauldin explain that there are sixty workers in steel-relying industries for every steelworker. This instance shows that there are many companies which use steel and steel products than the companies which manufacture the steel. It implies that the steel_x0096_using companies employ many workers than the steel manufacturing companies. The resultant is that steel-using companies will not be able to acquire steel due to prices leading to their crumbling. If these firms cease to function, their employees will be jobless. Unemployment curve (U) will shift to the right side. The rise in unemployment will have a negative effect on the overall performance of the economy. The government will have to increase its cash transfers and unemployment benefits, social ills will rise and consequently, people will lack confidence in the Trump administration. To prevent crumbling of steel-relying industries, Schlesinger, Ballhaus, and Mauldin exude that there need to be competitive steel prices for those industries to be competitive and export.

Restriction of steel imports will have a negative effect on the planned investment in the sector. If the restriction is indeed confirmed, the demand (D) of steel and steel products in the home market will rise. Consequently, price (P) of the steel will increase. High prices of steel and steel products will prohibit injection of any planned investment in the sectors. Investors will be scared and most likely they will run away to other favorable economies with the right and solid regulation. The planned investment curve (I) will go downward due reducing attraction to invest in the industry. This indicates that restriction on steel import will have an inverse relationship with the planned investment. If the investors hold on to their money, it will hurt the cash circulation system which will demand the government to boost the deficit. This is likely to raise the level of inflation.

Personal Opinion and Conclusion

The student_x0092_s opinion is that the government should the free market policy to take its course other than creating an insatiable demand for steel and steel products through restricting steel imports. Rather protecting the steel manufacturing industries from factors of a free market, the government should strengthen them subsidies. Through subsidies and other favorable policies aimed at lowering the production cost will enable the steel manufacturing firms to compete effectively. This strategy will also strengthen steel-using companies to be competitive since the price of steel will be contained. The student agrees with the article in that the government should not act as if America exercises closed economy. It ought to strengthen its industries rather than isolating them from fair competition.

In conclusion, the student concurs with the authors in that the steel manufacturing sector does not need new steel import restriction. The government constantly imposes curbs to guard its industries against dumping, thus ensuring that the steel that gets its way to America has an equal value to that produced in the America. Otherwise, if the Trump regime proceeds with its toughen trade policies, it is likely to receive similar treatment from the target nation. America being great again does not mean it working on its own; it requires the other nation for what it does not produce and for its surplus to find market competitively.

November 23, 2022

Literature Economics



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Expertise World Economy
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