On the first of June 2018, the US tariff is alleged to have entered in force for aluminum and steel imports mainly from the European Union, a decision that was sired by President Donald Triumph who intended to extend some of the temporary exemptions. For these countries, it is essential to note that the tariff exemptions have already taken effect, an aspect that was received with the lodging of complaints to the World Trade Organization (WTO). This audit, therefore, seeks to examine and conduct an analysis on Everett Rosenfeld’s views in his article titled, “The US extends tariff exemptions for European Union and other allies.”
Summary of the Article
Rosenfeld alleges that on the 1st day of May, an extension was put for the aluminum and steel producers over tariff exemptions for the U.S. allies. Triumphs administration resorted to the need to postpone the tariff exemptions on a section of its allies such as the European Union for a period of thirty days with the intent of allowing further consultations and discussions (Rosenfeld, 2018). Reports reaching CNBC revealed that the decision period would not exceed 30 days, thus seeking for deliberations on the levels of quotas each state would agree to peacefully.
It is, however, fundamental to realize that according to the economy, tariff exemptions significantly hurt economies since it only benefits a section of nations at the expense of a myriad of industries and ends consumers as revealed in Figure 1.1 below that reveals the inconsistencies in the steel pricing trends due to tariff exemptions. Technically speaking, it is essential to note that tax exemptions mainly result in deviations from the natural demand and supply laws, thus resulting in deadweight losses (Rosenfeld). Following the imposition of tariffs in 2018, it is essential to note that the prices of materials such as steel as revealed in Figure 1.1 below significantly revamped in as much as it seems that in the coming years, this will reach stability.
This, therefore, explains the reason why Triumphs administration has halted the tariff exemptions with the intent of arriving at an agreed quota. These agreements are therefore directed towards underscoring success in Trump’s administration in reaching a successful agreement in the fair outcomes with its neighbors, efforts that are intended to protect the U.S.’s national security as well as address the global challenges affecting the aluminum and steel industries (Rosenfeld).
As revealed in the graph below in Figure 1.2, the theoretical effects of tariffs on the supply and demand of products would significantly affect an economy. In this regard, it is essential to note that if the U.S ignores the transaction costs established at Q, then there is a likelihood that the natural equilibrium for the domestic demand and supply of its products will be constant.
However, its efforts should open up to global and international trade with other economies such as the EU, efforts that establish the need to lower the prices (P1) of aluminum and steel since the domestic producers only have the capacity to produce Q1 while the domestic buyers can only consume Q2, with the difference left for foreign producers (Side, 2018). The addition of tariffs, on the other hand, may increase the prices of the products to P2, an aspect that may significantly raise the domestic supply to Q4 as well as lower the domestic demand to Q3. It is therefore assumed that this solution is effective as it results in an established quota that benefits all the member states.
Conclusion
As exposed in the views of Rosenfeld, the US tariff is alleged to have entered in force for aluminum and steel imports mainly from the European Union, a decision that was sired by President Donald Triumph who intended to extend some of the temporary exemptions. It is, however, fundamental to realize that according to the economy, tariff exemptions significantly hurt economies since it only benefits a section of nations at the expense of a myriad of industries and end consumers.
- Rosenfeld, Everett. “US Extends Tariff Exemptions for European Union and Other Allies.” CNBC, 2018, https://www.cnbc.com/2018/04/30/us-extends-tariff-exemptions-for-eu-and-other-allies.html.
- Side, Tim. “A Look at Tariffs and Trade Wars – Acropolis Investment Management”. Acropolis Investment Management, 2018, https://acrinv.com/look-tariffs-trade-wars/.
