Steel and Aluminum Tariffs
For the past four years, I have been writing from time to time that we need to restore some import taxes to get our industries back into the United States. The first legislation that brought import taxes to the United States was passed in 1816 and the bill was the product of Henry Clay and John Calhoun for whom our city was named. The bill was called the Tariff Act of 1816 and it levied a 25 percent tax on products that were brought into the United States from foreign countries. Most of these tariffs related to textile products from Europe and they were supported after the Civil War by the Republican Party. At one point in the nation’s history, revenue from tariffs was the largest single income item and exceeded 50 percent of the income of the country. Today it is about 1.2 percent of the country’s revenue.
After World War II the United States wanted to help the nations that were hurt by the war years. They began to reduce the tariffs and go into free trade in order to open the United States market that is the biggest in the world to those countries that were hurting economically. After a few years, the tariffs were eliminated on textile products, which was the major industry in the Southeastern United States. Every small town had a textile or apparel plant that was the major employer of the town. In the 1950s, there was more than 1,200,000 people working in these trades. All of the textile and apparel plants eventually closed because they could not compete with the products made in China and India. Today there are about 120,000 people working in the two industries. Many of them are repackaging imported products to sell to the American retail market.
Back when the American automobile industry was booming in Detroit, the steel mills in Pittsburg and in Birmingham were running at full production. The limiting factor on foreign steel in the past has been quotas. Each country was told how many tons of steel they could import into the United States. When foreign automobiles began to be shipped into our country fully assembled the quotas on steel were relaxed in order for the American auto producers to buy steel for raw materials at the lowest price. Most of the steel mills in the United States closed because they could not compete with the imported steel. Steel is crucial to the growth of our country. Our buildings and our vehicles require steel. We must rebuild our domestic steel industry. If we went to war with some of our steel supplying countries and our supply of steel was cut off we could not build the military equipment necessary to conduct the war. President Trump has stated that he would like to see a 24 or 25 percent tariff on imported steel. This amount should make American steel competitive in the domestic market and bring back the American steel mills to supply steel to USA manufacturers.
The fear of establishing this tariff is that the countries that are affected might put a tariff on the farm products that are being exported from our country. President Trump’s position on this is that nothing will be done without negotiation so that we will have something to say about the actions. It may be possible to reestablish quotas on some of the steel and reduce the tariff in particular instances. The NAFTA ( North American Free Trade Agreement) between Canada, the United States, and Mexico has not proven to be good for the United States. It is being renegotiated at present and some restrictions on steel may be included in the newer version. Canada is the top supplier of basic raw steel to the USA, with South Korea and Mexico being the next highest suppliers. The mined iron ore comes primarily from Australia, Brazil, China, and India.
President Trump plans to put a 10 percent tariff on aluminum imported into the United States. The world production of aluminum is 57.6 million tons per year. China produces 31 million tons of this production ( nearly 54 percent). Russia produces 3.6 million tons and Canada produces 3.3 million tons. In the United States we produce only 840 thousand tons per year of aluminum metal. At the same time we mine over 5.0 million tons of aluminum oxide that is sold on the world market and used to make aluminum metal. China supplies over 22 percent of the aluminum foil used in the United States. Just a few years ago the USA made all of the aluminum foil that was used in the country.
Aluminum used as a structure material is very important to the welfare of our country. This is again an example of where we need to be a major supplier of aluminum structure material to our machinery and vehicle builders. Aluminum is essential to our economy and we do not need to be dependent on other countries to supply this material. We mine the base raw material and we should process it into the aluminum structure material that we need.
Our politicians have gotten hung up on free trade and now we have a President who knows the meaning of fair trade. We have a severe trade deficit. We are bringing in products and sending out our money. We need to keep more money in the country or export more products which can bring our money back into the country. Our government is operating with a severe trade deficit and we do not have any extra money to send out of the country.