On December 2, 2019, President Donald Trump announced that the US will “restore” steel and aluminum tariffs on Brazil and Argentina, A “massive devaluation of their currencies” is what he cited. The reason for Trump to restore these tariffs is because he wants to stick by his words by hammering trade deals to bolster his “America First” economic agenda. Yet, a US-China trade agreement has not been signed. Additional tariffs on Chinese imports are expected to go into effect on December 15, 2019.
“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” was what trump tweeted on the 2nd of December.
Currently, Argentina is in an economic crisis with its high inflation, deep indebtedness, widespread poverty and a currency that has failed under the leadership of President Mauricio Macri who is currently no longer in power as of October 2019. Brazil is grappling with double-digit unemployment, and its economy is headed toward its third straight year of 1% growth after all ready it’s two years of a deep recession. Rubens Barbosa, a former Brazilian ambassador to Washington, told the press that Trump is “punishing Brazil’s government and companies without a specific cause. This is an unfair relationship. Brazil is making gestures after gesture to support the U.S. in international forums, but the U.S. is not doing the same.”
This causes a ripple effect with China since Brazil and Argentina have both benefited well from the U.S. trade war with China. They have taken advantage of Chinese import taxes on U.S. farm products to export more agricultural goods to China. This could affect Brazil’s decision to buy 5G wireless technology from China’s Huawei soon.
“The United States Federal Reserve should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. It makes it very hard for our manufactures & farmers to fairly export their goods.” Trump stated.
During a meeting in October, the Federal Reserve cut short-term interest rates for the third time this year to try to support the U.S. economy. Yet it planned to have no further interest rate cuts because of absent clear evidence of a worsening U.S. economic outlook. In the past President Trump’s trade war with China hurt U.S. farmers after Beijing retaliated when the president-imposed levies on hundreds of billions of dollars of Chinese-made goods. Trump said that China is paying the U.S. billions and billions of dollars in tariffs and that nearly $30 billion of lost wages will be made up to farmers.
Because of inflation in steel prices, the U.S. steel producers are struggling since Trump’s administration put tariffs into place last year. The demand for steel and energy sectors have slumped because drillers are pulling back on purchases of steel pipe. In its last quarter, it was reported the U.S steel experienced its first loss since early 2017, and the division that makes pipes for energy companies lost $25 million. Because of this downfall, these companies have laid-off workers and shut down some of its blast furnaces.
Time will ultimately tell what the effects will be.
