Goldman Sachs Group delivered a comprehensive critique of Donald Trump’s planned metal tariffs, saying that they risk damaging the world’s biggest economy by raising costs just as price pressures build, hurting allies more than others, and creating a two-tier global market.
“Import tariffs make the US less competitive by raising the prices of raw materials,” the New York-based bank said in a report received on Tuesday. “By imposing across-the-board tariffs to all steel and aluminum imports, the larger economic impact is on Canada, Mexico and the EU, and it ironically eases the economic impact to China and Russia,” it added.Trump’s plan has ignited a firestorm of opposition, with criticism from around the globe, senior members of his own party, and top manufacturers including Ford Motor. As Goldman weighed in, BHP Billiton delivered its own negative assessment, with the world’s biggest miner describing Trump’s move as a “black day for the world.”
Goldman’s report came as White House economic adviser Gary Cohn is summoning executives from US metals users to meet with the president on Thursday to fight the curbs.
“The president has likely created a two-tier metal market,” analysts led by Jeff Currie wrote. “Economically, a two-tier market is ultimately damaging to US downstream industries that consume these metals, as it creates an uneven playing field for US industries that face higher metal prices.”
Goldman flagged the potential for the tariffs -- should they be imposed under Section 232 of the 1962 Trade Expansion Act -- to risk adding to inflationary pressures just as the Federal Reserve has been raising interest rates. “The tariffs reinforce the reflationary pressure already under way globally.”
“Net consumers of steel and aluminum in the US now face cost disadvantages relative to their international competitors, especially at a time when the labor market is tight and wage inflation is picking up,” the bank concluded. “This is the irony of Section 232: a tariff intended to support US industry may end up boosting margins and investment for a small subset of producers while leaving the broader economy at a disadvantage.”