IMF opposes Trump’s import duty proposal on steel, aluminum

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The IMF has warned that the plans of US President Donald Trump to impose heavy tariffs on import of steel and aluminum would cause damage not only outside the US, but also impact the American economy.


  • Trump said that he would impose a 25 per cent import tariff on steel and 10 per cent on aluminum to protect US producers.
  • The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminum and steel, IMF spokesman Gerry Rice said, a day after Trump made an announcement in this regard.
  • IMF, he said, is concerned that the measures proposed by the US will, de facto, expand the circumstances where countries use the national-security rationale to justify broad-based import restrictions.
  • “We encourage the US and its trading partners to work constructively together to reduce trade barriers and to resolve trade disagreements without resort to such emergency measures,’’ Rice said.
  • The tariffs — 25 per cent on steel and 10 percent on aluminum — cover two materials that are the lifeline of the construction and manufacturing sectors in the US. The announcement angered key US allies — Canada, the EU, Australia, Mexico and China.
  • European Commission chief Jean-Claude Juncker vowed the bloc “will react firmly” to defend its interests. Canada and Germany both termed the tariffs “unacceptable’’.
  • Trump has defended his decision, saying “trade wars are good’’. He tweeted that the US was “losing billions of dollars on trade” and would find a trade war “easy to win’’. In a tweet early on Friday, Trump said the US would “win big” in a trade war.


The concept of protectionism refers to economic policies that can be implemented by governments in order to limit trade across countries, whose primary goal is to promote fairer competition and help domestic companies by making their goods more competitive than foreign ones. Tariffs and other protectionist measures increase the price of imported products, making them appear relatively more expensive than local ones, and also affect the domestic jobs market. Protectionism has had a major role in the American political environment.

Protectionist policies protect the producers, businesses, and workers of the import-competing sector in a country from foreign competitors. However, they adversely affect consumers in general (by raising the cost of imported goods), and harm the producers and workers in export sectors, both in the country implementing protectionist policies, and in the countries protected against.

  • There is a broad consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth
  • Protectionism is frequently criticized by economists as harming the people it is meant to help. Mainstream economists instead support free trade
  • The principle of comparative advantage shows that the gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.
  • Protectionism results in deadweight loss; this loss to overall welfare gives no-one any benefit, unlike in a free market, where there is no such total loss.

Q.1 How does US protectionism  will impact to Indian Economy? Briefly explain.



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