Crony capitalism and Trump’s tariffs

Government intervention in the market all too often creates incentives for the well-connected and well-organized to manipulate the rules to limit competition and benefit themselves.

This certainly appears to be happening with tariffs on steel imports.

Following the imposition of tariffs by the Trump administration on highly questionable national security grounds, the Commerce Department has overseen a process by which American companies that rely on imported steel can apply for a tariff exemption.

More than 20,000 companies have filed for exemptions since May, reports The New York Times. And the exemption process has been described by Rep. Jackie Walorski, R-Indiana, as “opaque, unfair and breathtakingly inconsistent.”

The Wall Street Journal editorial board describes the process as “tortuous, with businesses big and small forced to go through a tremendous amount of paperwork in a system seemingly tilted against them.”

But there’s an added element: U.S. steel companies, which benefit from reduced competition thanks to tariffs, can intervene in the exemption process and object to the granting of exemptions.

So far, it appears their efforts, coupled with the difficulty of the process, have been successful.

According to The New York Times, 639 requests were denied as of the end of July. Half of those were due to objections by United States Steel, Nucor or AK Steel Holding Corporation, American-based companies. Most of the rest “were in cases where the company applying for an exclusion erred in its submission.”

This is convenient for American-based steel companies which, thanks to tariffs, benefit from near-captive consumers.

While protectionists might argue this is a good thing for American steel jobs, there are far more jobs put at risk in businesses that rely on steel than are in the steel industry itself.

Forced to pay for higher-cost steel, many companies will have to lay off workers, as Mid Continent Nail Corporation in Missouri recently had to do. The largest nail manufacturer in the country has been hit hard by the steel tariffs. Chris Pratt, Mid Continent’s operations general manager, told NPR that customers canceled 50 percent of their orders upon the imposition of tariffs. The result? Over 100 job losses.

This is a predictable outcome of President Trump’s misguided tariff policy.

But on top of that, real people are losing their jobs, and many more likely will, as long as the tariffs remain in place and as long as American steel companies can work to block exemptions in a process that doesn’t seem designed to actually hear the concerns of American companies.

This is not how a free enterprise system is supposed to work. This is how crony capitalism works.

— Digital First Media