Mon | Oct 15, 2018

Editorial | Jamaica in the midst of Trump’s trade war

Published:Wednesday | March 7, 2018 | 12:00 AM

Donald Trump's threatened global trade war is not a matter of mere academic interest for Jamaica, beyond the fact that such fights are never good for anyone, including the bystanders. For, despite the Government's public silence on the matter so far, we have direct interests at stake: the future of the bauxite-alumina sector.

Mr Trump, long before he became America's president a year ago, ranted about the supposed unfair trade deals the United States had inked, which he blamed for the US$566-billion deficit in the trade of goods and services the country had with the rest of the world last year. China, with whom America's deficit on visible trade reached US$375 billion in 2017, is the ogre at which America tends to target its complaints.

Now, President Trump is moving to do something, as he sees it, to right the balance, advance his America-first agenda, and protect US workers. So, last week, he announced his intention to add a 25 per cent tariff on steel imported into the United States and 10 per cent on imported aluminium.

If, indeed, the measures were aimed at China, Beijing is unlikely to be hardest hit by the proposed action. China is only the 11th-largest exporter of steel to the US after India, and way behind countries such as Russia, Turkey, Japan and Germany, which are in the top 10. For aluminium, China ranks number five as an exporter to the US, coming after the United Arab Emirates. For both products, Canada, one of America's partners in NAFTA, is the leading exporter.

Not surprisingly, while China has warned the US of the dangers of such protectionist moves and of upsetting the global trading system, other countries have bristled angrily, threatening politicised retaliation, rather than, it appears, resorting to the mechanisms of the World Trade Organization. The European Union, for instance, has drawn up plans to hit back with tariffs of its own on a range of American products. Canada's Premier Justin Trudeau has vowed to protect his country's industries and workers.

 

AMERICA'S ECONOMY

 

It is doubtful, even if there is in the short term a mirage of gains, that over the longer run, America's economy - despite Mr Trump's declaration that "trade wars are good" - would gain from a global skirmish. Subsidies to a few steel mills and aluminium refineries, and the protection of the jobs of a relatively small number of upstream workers, would likely be a cost to millions of consumers in the United States, and to the capacity of trade to build wealth globally.

Such an outcome, of course, would not be good for Jamaica. But there is also another immediate threat.

Implicit in Mr Trump's protectionism is the increasing of costs not only in his home market, but in other countries, too, whose companies have a diminished space with which to change. It was the opportunity to operate in an expanded global market, for instance, that would have, in part, caused a firm such as China's Jiquan Iron and Steel Company to buy the Alpart alumina refinery in St Elizabeth, with the intention of spending more than US$200 million to double its capacity.

Alpart's former owner, Russia's UC Rusal, is likely to be thinking, too, about the viability of their Ewarton refinery in St Catherine. For, if aluminium from China and Russia will face higher import duties in the United States, sourcing a semi-finished commodity from Jamaica for that product may well be questionable.

If the Holness administration thought that Mr Trump's steel and aluminium tantrum was merely trampling among elephants, they had better think again.