Tariffs on steel are wrong approach to reviving industry
If economic realities were as simple as President Donald Trump seems to think they are, his rash decisions to impose steep tariffs on some United States trading partners might work.
But a closer look on Wednesday at steel tariffs by Dispatch Washington Bureau Chief Jack Torry shows why it would be foolhardy to expect steel mills in Ohio and elsewhere to regain their glory days as a result of the president’s action.
As Torry reported, industry and economic experts cite multiple reasons why Trump’s imposition of a 25 percent tariff on steel imported from China as well as allies including Canada, Mexico and the European Union cannot meet high expectations of a revived domestic steel industry.
One obvious reason such a simplistic tactic will fall short — especially in terms of jobs produced — is improved efficiency in the industry itself. Producing a ton of steel took 10 worker hours in 1980 but requires just a tenth of that — one worker hour — today. That’s according to New York-based Bradford Research President Charles Bradford.
Efficiency is further enhanced — and the need for workers further suppressed — by the advent of mini-mills that convert scrap metal into first-class steel with less than one sixth of the workforce of larger integrated mills, according to Bradford.
That’s at least part of the reason steel-industry employment has fallen more than 35 percent, from 216,000 jobs in 1998 to 139,800 in 2016.
Other reasons for the decline of U.S. steel production and global dominance, of course, include the dramatic rise of China as a steel source. With government support to upgrade its production, China grew in the past 15 years from being a small player to commanding half of the world’s steel production, according to University of Pittsburgh economist Frank Giarratani.
So while the average annual demand for steel in the U.S. has averaged about 105 million metric tons from 2011 through 2016, as calculated by the Commerce Department, U.S. companies have produced about 70 percent of that need.
Complicating the ability of tariffs to effectively regenerate the U.S. market are the downstream implications of higher consumer prices for steel-reliant products such as cars, trucks and washing machines. It is worth noting that critics cite steel tariffs enacted by President George W. Bush in 2002 as backfiring, with tens of thousands of jobs lost in related industries. As Ned Hill, an Ohio State University economics professor, said, “A tariff is nothing but a tax on consumers, and it gets passed along.”
Torry’s report shows Trump could have demonstrated a better appreciation of the industry’s economics by pursuing an infrastructure bill in Congress, greatly driving up demand for steel for new roads, bridges and mass transit and avoiding the unintended but very real job losses likely to come from the tariffs. We hope the ultimate lesson of Trump’s tariffs is not as costly as critics expect.
The president has cited national-security concerns to justify the steel tariffs, but that doesn’t wash when one of the major impacts is to prompt retaliatory tariffs and loss of support from longstanding allies such as Canada, Mexico and European nations.
Trump’s greater concern should be the security of U.S. jobs likely to be lost due to downstream consequences and the higher prices we all will pay to finance this preventable trade war.