Trump Bolsters His Decision To Heavily Tax Steel Imports With A Reason That Would’ve Been Totally Legit In 1930
Here’s Why It’s Not A Good Argument For The 21st Century:
1) Although the U.S. is the world’s biggest steel importer, it still produces a substantial amount of the steel it uses: around 25%. Making it the 4th largest global steel producer. And production is has been trending higher in the last 2 years.
It’s still a far cry from the early 1900s when the U.S. manufactured nearly 40% of the world’s entire steel supply. But it’s also not like U.S. steel makers are on the verge of extinction, they just have to be competitive now.
2) The fact that we use a lot more than we make is not an altogether bad thing. It means the U.S. has a robust economy and people here want to build stuff.
3) U.S. imports are not coming from hostile, unstable countries: most of it is from Canada, Brazil, South Korea and Germany.
4) Despite what Trump keeps implying, very little of it is coming directly from China. Yes, China is the world’s biggest steel producer. And has a huge trade surplus with the U.S. But according to the Commerce Department, the U.S. is not even in the top 10 markets China exports steel to, and the amount is declining. That’s partly because of punitive Obama-era tariffs that make its product uncompetitive here.
(To be fair, the percentage is probably a little higher, since China is pretty good at skirting tariffs by moving product through other countries and making small changes to products that allow them to be reclassified).
5) While Trump’s move increases protection for U.S. producers, it also decreases pressure on them to innovate. They will no longer have to be able to compete globally, since they’ll likely to be able to sell all the steel they produce here. That creates a threat if the tariffs ever come off. It also ensures U.S. product will be high-cost, so even if it means more plants and more jobs, more inflation will probably end up making it a wash, at best, for most workers.
6) Finally, there’s a crucial part of Trump’s plan that’s not being discussed enough: his stated desire that the tariffs be applied equally to all exporters. (Since his plan has not been finalized, this still could be changed).
While most Presidents have instituted some kind of tariffs during their terms to combat “dumping”, or selling at artificially low prices in order to increase market share and attempt to put U.S. companies out of business, applying the same tariffs to everybody is a completely different thing.
The President would create an artificially friendly marketplace for U.S. manufacturers. In other words, unlike other Presidents, Trump isn’t punishing foreign manufacturers for bad acts, he’s just punishing them. That actually increases the likelihood of fast and furious retaliation.