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Donald Trump and Barack Obama
- The economic fallout of President Donald Trump's proposed tariffs on aluminum and steel imports is still unknown.
- But what's different about these tariffs - versus every president's going back to Richard Nixon - is the possibility of a full-scale protectionist stance from the White House, according to Jan Hatzius, the chief economist at Goldman Sachs.
President Donald Trump's planned tariffs on steel and aluminum imports haven't yet moved the needle on the US economy.
In fact, Jan Hatzius, the chief economist at Goldman Sachs. estimates that the tariffs would affect under 2% of total US imports. And even working through the effects on inflation and growth, the impact is small.
But there's a key difference between Trump's tariffs and other presidents' according to Hatzius.
"The concern is that this is coming unlike past instances of steel tariffs which every president going back to I think Richard Nixon has raised or instituted," Hatzius said at a conference on Wednesday.
"Compared with that, this looks more like something that could be a precursor to much broader types of trade frictions, whereas in the past, it was often something to basically buy out some opposition to a pro-free-trade move."
In other words, the proposed tariffs may be the beginning of more measures that restrict US trade. The tariffs, if implemented, would be another shot at fulfilling Trump's campaign promise of fighting for what he considers fairer trade deals with other countries.
The Trump administration has already tariffs on solar panels, lumber, and washing machines. Additionally, it's considering more taxes on a wide range of Chinese imports, and a clampdown on the country's US investments, according to Bloomberg.
George W. Bush's tariffs
The steel tariffs imposed by former President George W. Bush in 2002 illustrate how Trump's tariffs could be different, according to Hatzius.
Like Trump, Bush said he imposed the tariffs to protect the steel industry. But Bush was also able to score a political victory when Congress gave him the power to negotiate trade agreements with little interference from them. This so-called trade-promotion authority had been unsuccessfully sought by President Bill Clinton for many years, according to the New York Times.
The authority helped Bush appease people with a more protectionist mindset, Hatzius said. Bush lifted the tariffs on steel imports after 21 months.
But today, the balance of power in the White House is skewing towards the protectionists in Trump's administration. Other free-trade proponents including White House staff secretary Rob Porter recently left the White House.
"The people who have more protectionist views have become more prominent," Hatzius said. "Peter Navarro is more visible, Gary Cohn is obviously departing, so the balance seems to be shifting in a more protectionist direction." He added, "it's more of a tail risk than it was a few weeks or months ago - there's no question about that."
Global stock markets are already reflecting concerns about trade disputes and more protectionism from the White House. Stocks tumbled on Wednesday following the resignation of Gary Cohn, Trump's top economic adviser and a former Goldman Sachs executive, who reportedly disagreed with Trump's position on tariffs.