How serious is Donald Trump about slapping a 25% tariff on steel imports?

Editor Lifson believes that the announcement by the president on Twitter is a negotiating ploy, that his comment that "trade wars are good and easy to win" is just part of his opening gambit in whatever endgame he has in mind regarding protectionist policies.

That may be true.  But U.S. trading partners are taking the proposal seriously enough that they are examining retaliatory moves they can make against U.S. goods.

Reuters:

U.S. President Donald Trump's plan to slap stiff tariffs on imported steel and aluminum has rattled financial markets and stirred fears that some trading partners might retaliate by dumping U.S. Treasuries.

Should China, Japan and other nations, which have recycled their trade dollars through their Treasuries holdings, suddenly decide to whittle them down, markets could be in for a rough ride.

Such a retaliatory move, in the wake of Trump's first big protectionist action, comes at a time when foreign demand for U.S. debt is seen critical to offset an expected surge in federal borrowing needs, analysts and investors said on Friday.

"The threats are real," said Kristina Hooper, chief global market strategist at Invesco in New York.  "We need more foreign demand, not less."

To be sure, it is unlikely that Beijing, Tokyo and other overseas central banks would dump Treasuries altogether, if at all, analysts and investors said. Countries could wind up torching their own U.S. bond investments, without winning any guaranteed gains from Washington, they said.

"They already own a lot of them.  They would be shooting themselves in the foot," said Jack McIntyre, portfolio manager at Brandywine Global Investment Management in Philadelphia.

China has been threatening to dump U.S. debt for years, so nothing new there.  And it would have to be a pretty bad trade war for countries to tank their own economies to get back at the U.S.

But that doesn't mean there aren't serious repercussions being considered by our trading partners.

Reuters:

Major U.S. trade partners are likely to hit back.

Europe has drawn up a list of U.S. products on which to apply tariffs if Trump follows through on his plan.

"We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi's," European Commission President Jean-Claude Juncker told German television.

Trump's threats to unleash a trade war over steel crushed any hopes of substantial progress in current talks with Canada and Mexico to rework the North American Free Trade Agreement, heightening fears for the trade deal's future.

Canadian Prime Minister Justin Trudeau said any U.S. tariffs on steel and aluminum would be "absolutely unacceptable" and vowed to continue to engage with U.S. officials on the issue.

The International Monetary Fund also expressed concern, saying the proposed tariffs would likely damage the U.S. economy and those of other nations.

The U.S. is the third largest producer of steel in the world but also the world's biggest importer.  No one expects U.S. steel plants shuttered for 50 years to rise from the dead if we slap a tariff on imports, but it's generally agreed that protectionist action would create thousands of jobs.

But any tariffs would likely lead to a net loss of jobs in some other industries that are heavily dependent on exporting their goods.  It's why, despite the president's boast, trade wars are not good and are never easy to win.  In fact, if the past is any indication, there will be only losers.

Thomas Lifson adds:

We are a long way from actual moves to impose tariffs.  President Trump, in his usual pattern, is throwing out a provocation to see what kind of response comes.  That helps him formulate his further strategy, which will include actual administrative measures and possibly legislation.

Trump has made it clear that there are national security reasons to maintain steel and aluminum industrial capabilities in the United States.  That is a legitimate – indeed, a wise – reason to question the overall benefits of freer trade.

In reality TV terms, this is the trailer for the series to follow.