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Americans are 'going to pay the price' for Trump tariffs, former Obama trade advisor warns

  • Americans are ultimately going to pay the price if the Trump administration imposes broad tariffs on steel and aluminum imports, a former Obama-appointed trade representative told CNBC.
  • Ron Kirk said American consumers and businesses that have to buy the imported products would ultimately lose out.
  • The tariffs would make foreign steel and aluminum relatively more expensive in the U.S. market. It could also result in higher costs, and price increases that may fuel inflation and slow down the American economy.

Americans are ultimately going to pay the price if the Trump administration imposes broad tariffs on steel and aluminium imports, a former U.S. trade representative told CNBC.

Ron Kirk, who previously served as the United States Trade Representative and was a member of former U.S. President Barack Obama's Cabinet, explained that tariffs was just another term for taxes.

"American businesses and American families are going to pay the price for this," he told CNBC's "Squawk Box" on Friday.

The tariffs would make foreign steel and aluminum relatively more expensive in the U.S. market.

"(Historically) when we start down this road, the ultimate losers are consumers and businesses that have to buy these products," he added. "We do know the unintended consequences will be job losses in other industries."

President Donald Trump, on Thursday, said that the United States will set a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports as early as next week. It will apply the tariffs broadly, without targeting specific countries, and will not impose quotas.

"If you're going to play that card, we better be very careful how we do it because it would certainly invite every one of our other trading partners to act in the same way and hide behind the same veneer of protecting their national interest." -Ron Kirk, former U.S. Trade Representative

If the Trump administration goes ahead with its plan, it could help U.S. producers who have previously complained about unfair trade practices from foreign competitors, especially in China. But, it could also result in higher costs, and price increases that may fuel inflation and slow down the American economy.

In February, the Commerce Department recommended imposing heavy tariffs or quotas on foreign producers of steel and aluminum in the interest of national security.

Kirk explained that if every country tried to set import tariffs on national security grounds, it could lead to the collapse of the rules-based trading system.

"If you're going to play that card, we better be very careful how we do it because it would certainly invite every one of our other trading partners to act in the same way and hide behind that same veneer of protecting their national interest," he said.

Trade is a 'convenient whipping boy'

Trump has repeatedly criticized trade deals struck by his predecessors and argued that they hurt American workers. He has therefore pledged to make trade more fair to the U.S.

Kirk said that trade was a "pretty convenient whipping boy" in the country.

"Every manufacturing job that's been lost, we tend to blame it on NAFTA or something else," he said. "And it's a much more difficult reality to confront the fact that the overwhelming majority of jobs lost ... has been due to innovation and the introduction of robotics, and it's going to accelerate with artificial intelligence. But it's a lot easier to blame that on trade."

U.S. trading partners would likely take retaliatory measures against American exporters. Already, the European Union and Canada criticized the announcement and promised countermeasures to defend their national interests. Analysts also expect China to enact its own duties that could hurt U.S. exporters.

Previous administrations have also imposed tariffs on U.S. imports to protect domestic interests — President Bush did that with steel imports, and President Obama, with Chinese tires.

"There's nothing wrong with implementing these tariffs but they have to be done in a thoughtful way," Kirk said. He pointed out that the Bush and Obama administrations imposed tariffs in a more targeted manner and over a specific period of time.

Still, various reports have suggested those measures ultimately did not help the American domestic economy in the manner they were intended to.

"But the challenge we have here is when you have a president that has used tariffs as part of a political agenda, more to gain political market share than to really thoughtfully address market disparities in the global trading system, it almost certainly invites retaliation," Kirk said.

"I'm hopeful that the reality of the impact of this will soften some of the president's actions," he added.