TARIFFS AND THE UNSEEN VICTIMS AND COSTS OF POLITICAL PRIVILEGE
There’s not very much everyone in Washington can agree on these days, but it seems reasonable to say that the federal government shouldn’t use its considerable power to favor one sector at the expense of many others. It shouldn’t matter whether that one sector is well-connected or whether preferential policy goals play well with voters. Yet this is exactly what the Trump administration is doing with steel and aluminum tariffs. He’s ignoring the unseen victims and costs of political privilege.
On the surface, it’s not difficult to see why the stated aim of these import taxes — “to protect U.S. industry against unfair foreign competition” is popular. Americans don’t like cheaters or thieves, and we’re told that these tariffs are meant to punish other countries for their bad behavior — or they’re a national security imperative and will bring back well-paying jobs to the United States. None of this, however, withstands scrutiny as has been repeatedly shown.
Look more closely, and you see these tariffs for what they are: import taxes that are raising costs for American manufacturers and households. These Americans, however, are largely invisible to policymakers in Washington. The well-connected and well-paid steel executives get to sit at the mahogany table with Trump, pleading for special privilege and protection, while a supermajority of everyday Americans gets to watch on TV and shoulder the costs.
We must recognize that the American manufacturers who need access to steel and aluminum products now face higher production costs and shrinking customer bases. All across the country, workers in these manufacturing firms now face shakier job prospects while they care for their families. Consumers of household appliances, automobiles and dozens of everyday goods made with steel and aluminum are also unwitting victims.
You are one of those consumers. So many of the things you buy (your car, fridge, phone) are made with these products, and they’ll cost you more, starting now.
The vast majority of American manufacturing firms are small- or medium-sized businesses with razor-thin margins. Those businesses must now reprice their entire product lines and grapple with how much of the cost increase they can pass onto consumers before they start losing too much business. That’s what LOOK Trailers of Indiana is doing, as it struggles to absorb the 25 and 35 percent cost increases in steel and aluminum, two of the company’s key inputs of its manufacturing process. Companies are also looking into whether they must instead increase the share of steel-containing parts and components they outsource to stay profitable. That’s what Metalworking Group in Ohio is doing.
Think you don’t work for a steel-consuming sector? You might be surprised.
DowDupont, Inc. — the world’s largest chemical and plastics company — is delaying its decision to build a multi-billion plant in the United States because of higher metal prices and building costs. Think about that. If there were ever a sector to benefit from higher steel prices, it might be the plastics industry, whose products can be a substitute for steel. Yet steel is also a key cost for virtually any building project. Last year the firm completed construction of $6 billion in new factories, and those plants contained $1.2 billion worth of steel. Trump’s import taxes have made steel prices in the United States so high that even DowDupont has to halt expansion plans.
Unfortunately, we’ll never fully know of the businesses or jobs that could have been. We’ll never hear from the workers whose wages didn’t rise or whose jobs disappeared because of Trump’s import taxes.
There are 6.5 million workers in steel and aluminum consuming industries and 126 million households that consume those products. Most Americans don’t have access to press offices and lobbyists. Those Americans don’t know each other, they’re spread all over the country, and they don’t have the resources to organize a fly-in to Washington to tell lawmakers how Trump’s import taxes are hurting them. That’s in stark contrast to the handful of well-paid lobbyists representing steel and aluminum executives, who have the ears of the president and his commerce secretary (and former steel mogul) Wilbur Ross.
Who will stand for those forgotten firms, workers, taxpayers, and consumers whose voices are drowned out by the corporate beneficiaries of government privilege?
Veronique de Rugy and Christine McDaniel are senior research fellows with the Mercatus Center at George Mason University.