Implications of Imposing Tariffs on Steel and Aluminum: A Discussion on Liberal and Statist Arguments

This essay discusses the implications of imposing tariffs on steel and aluminum from the perspective of liberal and statist arguments. It analyzes the impact of the tariffs on the American political economy and the global economy. The essay concludes that setting of the higher tariffs will help in enhancing the competiveness of the domestic steel industries of the United States along with reducing the trend of increasing unemployment.

Running head: INTERNATIONAL POLITICAL RISK
International political risk
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Introduction
In the recent time, one of the major news currently in air is the increase in the import of
steel aluminum tariffs by 25 percent and 10 percent respectively. It is one of the major steps
being taken by Donald Trump in the recent time1. According to him, the increase in the import
tariff of the steel and aluminum would help the domestic steel producers to gain competitive
edge over the lower cost of the imported steels. Moreover, Donald Trump also stated that, this
policy is in accordance to the fair trade rather than just following the free trade, which further
amplified the debate between the free trade and fair trade2. However, there are various authors
who have given views in support or against the step being taken. In addition, this step will have a
few positive as well as negative implications on the American political economy as well as in the
global economy.
This essay will discuss about the statist and liberal arguments being given by different
authors regarding the increase in the steel and aluminum tariffs. Thus, it will help to decide
whether the step taken will have more positive impact or vice versa.
Liberal arguments
Liberal arguments are more inclined towards market and free economy. As stated by
some authors3, there are obviously some differences between the free trade and fair trade. This is
due to the reason that, free trade refers to the extensive liberalization of the market and
delegating the economical factors entirely on the market elements. Thus, government and other
regulatory authorities are not having any responsibilities in the economy. On the other hand, fair
1 "Forbes Welcome." Forbes.com. N.p., 2018. Web. 7 Mar. 2018.
2 Bown, Chad P. "How different are safeguards from antidumping? Evidence from US trade policies toward
steel." Review of industrial organization 42.4 (2013): 449-481.
3 Frieden, Jeffry A. Global capitalism: Its fall and rise in the twentieth century. WW Norton & Company, 2007.

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trade is the providence of equal opportunities to all the involved parties in the trading. Thus,
according to the authors, the key objective of initiation of free and market economy is to provide
opportunities to all. However, in the case of the steel and aluminum market in the United States,
equal opportunities are not being promoted. This is due to the fact that, the domestic production
of the steel in the United States cost higher compared to the imported ones4. This is having dual
demerits with one being the reduction in the profitability and market opportunity for the
domestic producers and the other one being inflow of the inferior quality materials. Therefore, it
can be concluded that though government should not have any role in the free economy but it
should promote fair deal for the involved parties. In addition, it is also the responsibility of the
government to safeguard the interest of the domestic industry even exposing them to the global
competition.
According to some other authors5, global political economy is one of the key factors to be
considered by the government in the recent time. Moreover, in the case of the United States,
political economy is not so favorable with the rapid rise of the economies such as China and
Russia. Therefore, in the free economy also, government should have some sort of regulation in
order to check the possibility of dumping in the domestic market by the foreign companies.
Moreover, in the case of the United States, there are various instances where it is being seen that,
inferior quality of goods are being exported.
All these arguments prove that the decision of imposing trade tariffs on steel and
aluminum is right from different point of view even if it is being judged from the liberal point of
view. The issue is more justified due to the reason that, the various export items of the United
4 Caruso, Eugene M., et al. "Mere exposure to money increases endorsement of free-market systems and social
inequality." Journal of Experimental Psychology: General142.2 (2013): 301.
5 Irwin, Douglas A. Free trade under fire. Princeton University Press, 2015.

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States also face huge tariffs from the importing government. Hence, it would be a fair deal if
tariffs are being put from the both side. For instance, importing of Harley Davidson bikes in
India attracts high tariffs and thus it is fair to have the opposite reaction.
Statist arguments
The move by the Donald Trump is more applicable and proper in terms of the statist
arguments. This is due to the reason that, statist argument is based on the authority of the
government on the market economy. According to some authors6, the policies of WTO are
further contributing in initiating the hyper globalization in the current scenario. This is due to the
reason that, according to the authors, policies of GATT are more effective in safeguarding the
domestic interest, while WTO is concerned with increase in the trade flow between the
countries7. This is leading to the fact that some countries are taking more advantage of the free
trade than others.
Another statist argument raised by some authors8 is increase in the rate of unemployment
in the United States. One of the key reasons for the increased rate of unemployment in the United
States is the outsourcing of the key facilities by the leading business organizations. The example
of Mexico is being given by the authors. According to them, a major portion of the employment
opportunities of the United States went to Mexico. This is due to the reason that, few business
organizations have already transferred their manufacturing facilities in Mexico from the United
States in order to gain the low cost of human resources9. Thus, having the tariffs from the
6 Rodrik, Dani. "The Globalization Paradox: Democracy and the Future of the World Economy." World Trade
Review 10.3 (2011): 409-421.
7 Wilkinson, Rorden. The WTO: Crisis and the governance of global trade. Routledge, 2013.
8 Cohn, Theodore. Global political economy. Routledge, 2015.
9 Cooper, William H. "Free trade agreements: Impact on US trade and implications for US trade policy." Current
Politics and Economics of the United States, Canada and Mexico16.3 (2014): 425.

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government will help the domestic steel and aluminum industry to survive in the competition and
it will regulate the unemployment rate in the domestic market.
Moreover, some authors have stated that due to the agreements such as NAFTA, United
States is becoming a major sufferer due to having higher cost of production. This is in turn
increasing the import of the goods in the country. Thus, imposition of tariffs will help in rebuilt
the lost ground of the American steel industry in the intensely competitive market. It will make
sure that other exporting countries will either reduce the tariffs on the American goods or will try
to export goods with higher quality. According to the author, this will lead to the fair trade deal
in the global economy. Statist arguments also agreed that the step taken by Donald Trump is
having political reasons also. This is due to the reason that, in the recent time, China is emerging
as one of the major competitors for United States in different sector. Thus, according to the
authors, it is important for the state to have some retaliatory actions against them in order to keep
them in check. Thus, the step taken by him is justified and it will keep more pressure on China in
the international trade with the United States.
Conclusion
Thus, from the above discussion it can be concluded that the tariff being set by Donald
Trump will have favorable implication in the steel and aluminum industry in the market of the
United States. However, it should also be noted that, this step will have some sort of negative
impression in the global market but from the view of both liberal and statist arguments, the step
is justified and will help in the fair trade deal between the United States and other countries. This
essay also discussed about tariff barriers being faced by the American products in other
countries. Thus, it is well justified that setting of tariffs in the import of steel and aluminum in

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the United States. This essay concludes that setting of the higher tariffs will help in enhancing
the competiveness of the domestic steel industries of the United States along with reducing the
trend of increasing unemployment.

6INTERNATIONAL POLITICAL RISK
Reference
"Forbes Welcome." Forbes.com. N.p., 2018. Web. 7 Mar. 2018.
Bown, Chad P. "How different are safeguards from antidumping? Evidence from US trade
policies toward steel." Review of industrial organization 42.4 (2013): 449-481.
Caruso, Eugene M., et al. "Mere exposure to money increases endorsement of free-market
systems and social inequality." Journal of Experimental Psychology: General142.2 (2013): 301.
Cohn, Theodore. Global political economy. Routledge, 2015.
Cooper, William H. "Free trade agreements: Impact on US trade and implications for US trade
policy." Current Politics and Economics of the United States, Canada and Mexico16.3 (2014):
425.
Frieden, Jeffry A. Global capitalism: Its fall and rise in the twentieth century. WW Norton &
Company, 2007.
Irwin, Douglas A. Free trade under fire. Princeton University Press, 2015.
Rodrik, Dani. "The Globalization Paradox: Democracy and the Future of the World
Economy." World Trade Review 10.3 (2011): 409-421.
Wilkinson, Rorden. The WTO: Crisis and the governance of global trade. Routledge, 2013.