The US steel and aluminum sector is in an excellent period. Thanks to economic growth, profits are rising. That raises the question of why President Donald Trump wants to introduce trade measures to protect these companies right now. That writes Business Insider.
The financial world is in turmoil over Trump's plans to introduce tariffs on steel and aluminum imports. Some parties are already bracing for a trade war.
For example, the European Union is developing plans to: as a countermeasure launch an import tax on Harley-Davidson motorcycles, bourbon and jeans. For now, however, everyone is ignoring the most important question: what does Trump want to achieve with the trade measures?
No support needed
If you are to believe Trump's Twitter posts, his plan was created primarily to protect American industry. However, do American steel manufacturers need that protection? Steel giant Nucor recently announced that 2017 profits have skyrocketed by more than 65% to more than $1,3 billion.
Industry partner US Steel turned a loss into a profit of nearly $400 million. This was the best result for both companies since 2008. Thanks to the pick-up in economic growth in the United States, the sector is currently doing well.
America first
The statement that the measures are necessary to improve the competitiveness of the industry can also be trashed. The total export value of the United States has grown from less than $2015 billion a month to more than $180 billion since the end of 200.
The total export value has consistently exceeded economists' expectations in recent months. February's $203 billion even marks its all-time high. This indicates that American companies are holding up well on the international playing field.
Dollar decline is not a coincidence
The growing export cannot be seen in isolation from the sliding flight of the dollar. Since the end of 2016, the euro has risen by more than 18% against the US currency. As a result, products and services from the United States have become a lot cheaper on the world market.
It is no coincidence that the dollar has depreciated considerably. The budget deficit is on the rise due to Trump's plans to cut taxes and increase investment in infrastructure. In addition, the Trump administration is doing everything it can to talk the US currency down as much as possible.
Win votes
The most likely scenario is that Trump wants to reconnect with his supporters (in the run-up to the House of Representatives elections on November 6.). After all, about 2 years ago, his surprising election victory was partly due to the support of workers in the steel sector.
If Trump has deeper intentions in his plans, it may be to force a break with the World Trade Organization (WTO). He has criticized the power of this institution several times.
No trade war
The danger of the current rhetoric degenerating into a real trade war is much less than some news reports suggest. Despite his tough language, Trump does not benefit at all from the unrest in the financial markets that this would cause. It is obvious that parties in that scenario will look for safe havens, such as the US dollar. And a more expensive dollar is something Trump certainly doesn't need right now.
Read more on Business Insider:
- Angela Merkel is going to make an effort to avert a trade war
- What will Trump do? Investors watch developments in the steel market
- What to do if China starts dumping steel in Europe?
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