The U.S. is back at it again with import tariffs.

It looks like significant, permanent tariffs are now likely for steel and aluminum in particular.

American steel companies are happy about this because foreign steel will now be more expensive, guaranteeing their sales. The U.S. imports 70% of the steel it uses. American steel companies can't compete with foreign steel producers, so these import tariffs are their salvation.

The result is that American products will become more expensive because steel, as a raw material, is more expensive in the U.S. and will remain so due to import duties.

So, initially, this is unfavorable for foreign steel companies, but in the second instance, American products will become more expensive. Just look at cars.

German cars are currently more expensive. But if American cars become more expensive due to the higher cost of steel in the U.S., German cars will become relatively cheaper. The only thing German car manufacturers need to do is survive the difficult interim period. Of course, the American government could also impose a tariff on imported cars. In that case, driving a car in the U.S. would become even more expensive overall. That's quite a big deal for a country where everything is done by car.

Regardless, American cars will become less attractive for Europe and the rest of the world since they'll be more expensive. This means German and European cars will face less competition from American cars elsewhere. The question then becomes how they'll fare against Chinese cars.

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Protectionism has never worked in the United States, never will.

At least I can "stock up" when the market tumbles due to the coming economic downturn. Then recoup when some semblence of sanity returns to D.C.

Rug Rat (Brent Hendricks)
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