American Steel Tariffs OPENING CASE ‘In March 2018, President Trump imposed a 25 percent tart on imports of foreign steel into the United States (and 10 percent tariff on aluminum imports}. n justfying the Stee! tarif, Trump argued that @ strong domestic steel in- dustry was necessary for the national secutty ofthe United States. In 2017, some 36 million tons of steel were im- ported into the US, while 816 millon tons were produced domestically Impor penetration intothe US. had Increased from about 23 percent of total steel consumption in 2007, 031 percent in 2017. The US. exports about 2 millon tons Of steel per year. There were roughly 140,000 people ‘employed in the US. steel industry in 2018, and around 5 millon employed in industries that consumed steel, Including construction, machinery, and automobiles, This was not the first time the US. steel industry hac been the beneficiary of impor tarifs. The industry has 3 Jong history of taf protection. Some critics complain that this is linked to the importance of steel producing states such as Ingiana, Pennsylvania, and Ohio in US. Presidential élections, In 2002, the Bush administration placed tats ranging from 8 percent to 30 percent on imports of fereign steel. The US. exempted its NAFTA partners Canada and ‘Mexico ftom these tariffs. The Bush tats were ited nine ‘months later after significant opposition from businesses in steel consuming industries, who claimed that higher stee! prices were resulting in significant job losses. In 2016, the ‘Obama administration imposed punitive tars as high as 5500 percent on imports of some stee! products from ‘China, arguing that Chinese producers were dumping ‘excess steel production in the United States at below the costs of production. Due tothe Obama tars (which remain In place), by the time of Trump's announcement, China accounted for only 2 percent of US. steel imports. The largest steel exporters to the US. in 2017 were Canada, ‘South Korea, Mexico, and Brazil The Trump administration argued that this round of stee!tarfs would help revitalize the struggling US. steel industry. Critics countered thatthe result would be higher pices for steel consumers and job losses in tose indus- ‘ties. The early evidence is mixed. Domestic stee! produc- tion in he US. increased by around 7 percent in the first year after the tarts were imposed, while Imports fell ‘round 10 percent. The prices of US. stee! products increased by around 20 percent in 2018 and profs for US. steel producers improved. Flush with cash, there have been several announcements regarding planned ‘expansions in capacity from domestc ste! producers, Including Nucor, Stee! Dynamics Inc. and US, Steel Corp. ‘These plans would adé about 83 milion tons of produc- tion tothe US. steel industry, increasing ts capacty by ‘4 percent ‘Onthe other hand, some stee! consumers have pushed back, pointing out that higher stee prices are hurting ther businesses. General Motors, a mejor stee! consumer, “announced in November 2018 that Trump's tariffs on steel {2nd aluminum) would cost it over $1 billon a year. The company announced plans to shut several plants and limite 15,000 jobs (sthough higher stee prices were not the only factor here). Similar, the Iconic American ‘motorcycle manufacturer Harley Davidson announced that is 2018 profts were wiped out by higher metal costs due ‘0 Trumps tats. Te company has announced plans to ‘move some production overseas as away of avoing the high costs of metals inthe Unted States and supporting foreign sales. Only time wile the announcements from ‘GM and Herley Davidson are indicative ofthe impact that higher steel prices wil have on many American busi nesses. these are the fist salvo, Tump’s stee! tarts may ultimately be judged to be no more successful than those imposed by George Bush in 2002. Analysis ofthe Bush tans suggested thatthe gains to steel producers were ‘outweighed by the osses US. steel consumers, ‘Sources: Sob Tea ae Alsta® MocDenad, "Foreign Stee! Keeps. Flowing into the US. despite Tarfis” The Wall Sreet Journal, ‘December 5, 2018 Interatons rade Adminstration, Stel Imports Report: Unted States, June 2018; Alsiar MacDonad, “Tarts Rol ‘Gobel tee! Trade, Cresing Wines and Losers’ The Wil Steet Journal, November 28,2088 Doug Mataconis, fe Trump's Tris, “Anercan Stet Industy Faces Downturn’ Outside the Botway, ‘January 1, 201; Ru Simon, Tale of Two Stee Frms and The Diverging Paths Under Trump's Tarts” The Wall Steet Journal, February 0,201; “Trfs on Stel ard Alumrum are Cresing Sone Winners” The Econom, August 9, 2018; 6 C. Hufbouer end B Goodrich, ‘Sto! Policy: The Good. the Bad, and ho Ugh Peterson Inst: Inematona Econoncs Pokey Briefs, anuary 2003.