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Trump administration wrong on tariffs and trade wars, experts say

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Commerce Secretary Wilbur Ross downplayed the potential fallout of a trade war Friday as economic experts warned that President Donald Trump’s plan to impose steep tariffs on imported steel and aluminum could have dire consequences for American workers.

“In any war, there may be a few casualties, and that just comes with the nature of the beast,” Ross told CNBC Friday morning.

He also dismissed a jittery international market as “overreaction” and “hysteria,” saying the plan to impose a 25 percent tariff on imported steel was “no big deal.” The import tariffs would mean American companies that chose to purchase their steel or aluminum from abroad would have to pay an additional tax to the U.S. government, effectively increasing the price and making domestic purchases more attractive.

Wall Street, contemplating the possible far-reaching effects of a global trade war, saw markets tumble Thursday and Friday. Economists were quick to point out that the inevitable “casualties” of the tariffs and potential trade war that ensues will be greater in number than Ross suggests.

“The losers are plentiful, and there are actually way more losers than winners. The issue is that we’re not just talking about finished steel, but we’re talking about entire industries that use semi-finished steel to add value,” said Monica de Bolle, senior fellow at the Peterson Institute for International Economics.

Related: Trump says trade wars are good

“Steel is used in a wide array of products, including equipment,” she said, predicting that manufacturers of everything from car parts to canned goods could be forced to increase prices and shed workers to make up for the higher costs a 25 percent tariff would impose.

Meanwhile, a 10 percent tariff on imported aluminum could hurt workers at companies that make anything from airplanes to products packaged in aerosol cans.

While talk has centered around how the tariffs might affect manufacturing heavyweights like Boeing and General Motors, de Bolle said much of the damage would be to smaller companies less able to absorb a 25 percent price hike on a vital raw material.

“A lot of these companies are not big — they’re small to medium sized, which in their local communities could have a big impact,” she said.

The range of products incorporating these materials, either directly or somewhere along the supply chain, means consumer-facing sectors of the economy could be hit especially hard, said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation.

“The other thing to remember for retailers is that it’s not just the products we sell, but it’s all of the equipment — between the buildings, the racks in the stores, the rebars in the distribution centers, the forklifts in the warehouse.”




Image: An employee works on a Passat sedan at the Volkswagen plant in Chattanooga, Tennessee on July 31, 2012.

An employee works on a Passat sedan at the Volkswagen plant in Chattanooga, Tennessee on July 31, 2012.