In advancing the neo-liberal economic theory, the term “free market” was coined to justify the economic behaviour of countries in the modern era. Even though there are limits to free market, it is basically the economics of supply and demand which is driven by the individual hand and thrives on the basis of mutual interest that leads to the economic well-being of people and countries.
The concept of the free market theory evolved from the writings of the 18th century Scottish economist and philosopher, Adam Smith. However, Smith was not advocating that in economic matters, people should be free to do as they please no matter what.
Certainly, Smith’s concept of “free market” was expanded by greedy and selfish leaders to advance their country’s economic security and interests. Smith argued that it is for selfish reasons that leaders try to promote their country’s economy in order to gain the upper hand over their counterparts.
In his book, The Wealth of Nations he asserted that free markets do not mean that nations should open up their markets to all and sundry in order to be taken advantage of by selfish and greedy leaders. It means that a handful of greedy leaders/countries should not be allowed to freely destroy others.
This in essence supports President Trump’s decision to impose a tariff of 25 percent and 10 percent respectively on imported steel and aluminium. The goal is to bolster US steel and metal industries which have been crippled by lower prices of imported steel from China, Canada and the European Union (EU).
President Trump stated that it is time for Americans to shed their self-imposed impotence on unfair trade practices that have strangled the economy and made the lives of steel workers in the United States miserable.
As he puts it, “Our steel and aluminum industries have been decimated by decades of unfair trade and bad trade policies with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and smart trade.”
Following President Trump’s announcement to impose tariffs on imported steel and aluminium, all three major US stock indexes tumbled with the Dow Jones industrial average falling more than 500 points or 2% at one point.
Meanwhile, US Steel’s stocks soared by over five percent, while Trump’s decision is in keeping with his campaign promises, it is viewed by economists as a step toward protectionist trade policies which could lead to higher prices and affect US consumers.
The tariffs would most likely trigger retaliation from other countries. As reported, China is already looking into restricting US exports of sorghum and soybeans, which are important crops for tens of thousands of American farmers.
And the EU is in serious discussions with its member countries about imposing tariffs on US agricultural products such as cheese, bourbon and other foodstuff. In a worst-case scenario, a trade war could emerge with the implementation of more protectionist trade policies by China and the EU in response to the decision by the Trump administration.
Many in the US are worried that the imposition of tariffs on imported steel and aluminium could lead to a substantial increase in the price of goods that use those products and cause inflationary pressures on the US economy.
The Trump administration has been warned that an aluminum tariff could increase the cost of cans, which in turn could lead to higher prices for beers and other canned products.
While the price increases could be limited to a few sectors or goods, the possibility of retaliatory measures by other countries could pose a greater threat to the US economy.
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