Goldman Rips Into Trump's Tariffs as BHP Laments `Black Day'

(Bloomberg) -- Goldman Sachs Group Inc. delivered a comprehensive critique of Donald Trump's planned metal tariffs, saying 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 U.S. less competitive by raising the prices of raw materials,” the New York-based bank said in a report received on Tuesday. It added: “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.”

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 Co. As Goldman weighed in, BHP Billiton Ltd. delivered its own 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 U.S. 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 U.S. downstream industries that consume these metals, as it creates an uneven playing field for U.S. industries that face higher metal prices.”

Bourbon and Jeans

In a sign that Trump's plan risks unleashing a tit-for-tat response from top trading partners, the European Commission has proposed retaliatory tariffs on imports of U.S. steel, apparel, textile and footwear, as well as selected industrial goods, according to a draft seen by Bloomberg News. That list includes motorbikes, t-shirts, jeans, corn and bourbon.

Goldman said the U.S. action -- which invokes Section 232 of the 1962 Trade Expansion Act -- would 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 U.S. 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 U.S. industry may end up boosting margins and investment for a small subset of producers while leaving the broader economy at a disadvantage.”

To contact the reporter on this story: Jasmine Ng in Singapore at jng299@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Jake Lloyd-Smith

©2018 Bloomberg L.P.