Raising taxes on trade, i.e. tariffs, almost always fail. And Trump's higher trade taxes on steel are no different.
The trade deficit on steel has risen, and barely any new jobs have been created in the industry. The only thing that has happened is prices that use steel as an input have risen, which is what happens when you raise taxes on goods and services.
Opinion | How Are Those Steel Tariffs Working?
The trade deficit on steel has risen, and barely any new jobs have been created in the industry. The only thing that has happened is prices that use steel as an input have risen, which is what happens when you raise taxes on goods and services.
• Trade deficit. “We need and we will get lower trade deficits, and we will stop exporting jobs and start exporting more products instead,” Commerce Secretary Wilbur Ross said last March after the President announced his steel tariffs. We disagree with the President’s preoccupation with trade deficits, which are affected more by capital flows and currency values than trade policy.
But it’s worth pointing out that the trade deficit in steel increased last year by $1 billion as exports (measured in dollars) fell 7% and imports rose 1%. Imports ton for ton fell more than exports did. But the average price of steel per ton increased more for imports than exports, perhaps due to shifts in currency values and product deliveries—e.g., businesses importing more expensive specialized steel grades.
Retaliatory tariffs by Canada and Mexico contributed to a $650 million drop in American steel exports. At the same time imports increased from Mexico and Canada, which are deeply integrated into U.S. supply chains. In many cases manufacturers paid the tariff and passed on the cost to customers.
• Jobs. While domestic steel production rose 5% last year, the tariffs had little impact on employment in the industry. Steel makers added 2,200 jobs in 2017, but just 200 in the last year. One reason is that steel makers ramped up production at highly-efficient minimills with electric-arc furnaces that employ few workers.
But it’s worth pointing out that the trade deficit in steel increased last year by $1 billion as exports (measured in dollars) fell 7% and imports rose 1%. Imports ton for ton fell more than exports did. But the average price of steel per ton increased more for imports than exports, perhaps due to shifts in currency values and product deliveries—e.g., businesses importing more expensive specialized steel grades.
Retaliatory tariffs by Canada and Mexico contributed to a $650 million drop in American steel exports. At the same time imports increased from Mexico and Canada, which are deeply integrated into U.S. supply chains. In many cases manufacturers paid the tariff and passed on the cost to customers.
• Jobs. While domestic steel production rose 5% last year, the tariffs had little impact on employment in the industry. Steel makers added 2,200 jobs in 2017, but just 200 in the last year. One reason is that steel makers ramped up production at highly-efficient minimills with electric-arc furnaces that employ few workers.
Opinion | How Are Those Steel Tariffs Working?
