Trump Announces New Tariff on Steel. It's Most Certainly a Mistake
*Update: President Trump has signed the tariff order.
If you’re thinking of buying anything that has steel or aluminum in it, brace yourself for higher prices if President Trump’s proposed new tariff is implemented.
Cars, washers and dryers, and many other everyday products will become more expensive, and thousands of American workers may lose their jobs.
Trump recently told steel and aluminum executives that he plans on imposing an import tax on foreign steel and aluminum products, claiming that American workers have been harmed by decades of "unfair trade" and "bad policy" with other countries throughout the world. The new import taxes would be 25 percent on foreign steel, and 10 percent on foreign aluminum.
As well-intended as the policy may be, to protect American jobs from other nations that also produce steel and aluminum, almost all Americans are going to feel negative consequences of this policy.
How so? Consider past as prelude. President Bush imposed a similar import tax on foreign steel back in 2002, causing havoc in almost all industries that use steel.
In March 2002, President George W. Bush imposed a 30 percent tariff on Chinese steel. The results were chaotic. In a report put out by Consuming Industries Trade Action Coalition in February of that year, the coalition found the tariffs against China boosted the overall prices of steel and cost the U.S. 200,000 jobs in businesses that buy steel, representing $4 billion in lost wages.
Economic scholar Mark Perry calculates a similar tariff on specialty steel in the 1980s cost American consumers about $1 million per job saved (that’s $2.26 million in today’s dollars). That’s hardly a good trade-off by any means.
The increased prices of steel due to the import tax makes manufacturing more expensive. One of the saddest results of the 2002 tariff was the fact that more workers lost their jobs because of higher steel prices than the total number of Americans employed in the steel industry itself.
Of the 200,000 jobs lost from the 2002 steel tariff, about 50,000 of them were metal manufacturing jobs. Every U.S. state lost jobs from higher steel costs, and 16 states lost at least 4,500 steel-consuming jobs.
While some jobs in American steel may be "saved," other people will end up losing their livelihood because of the domino effect. When products become unaffordable, the manufacturing line slows down, and the jobs dry up.
Toyota has already made known that the steel and aluminum tariff will increase its production costs, and those costs will inevitably be paid by the consumer (as all taxes are). Americans have been hurt by tariffs in the past. Repeating such a mistake is clearly avoidable.