How Trump’s steel tariffs failed

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The United States and the European Union on Monday announced a truce on steel and aluminum tariffs, ending a June 1 escalation as the two sides negotiate “global excess capacity” and possible tariff abrogation. It’s a small step forward, but President Biden would do the US economy a lot more good if he rolled them back unilaterally.

The evidence is overwhelming that Donald Trump’s tariffs have benefited the few at the expense of the many. Think of the 300 or so American manufacturers who wrote to Mr. Biden this month protesting the scarcity of metallic materials and unsustainable prices.

Most of the signatories were little-known industrial companies with names like Ohio Screw Products or Clips and Clamps Industries. “On certain products,” they said, “American companies pay 40% more for similar steel compared to their European counterparts.” Delivery times have been reduced from six to 20 weeks, “with some products not promised delivery until 2022.” Mr Biden’s large infrastructure projects could escalate the tension.

Spot steel prices have “risen dramatically,” Whirlpool CEO Marc Bitzer said last month on an earnings call. “Take North America, they went to $ 1,500. These are levels, I mean, unknown. Rising costs of materials, mainly steel and resin, “will have a negative impact of about $ 1 billion on our business” this year, he said, predicting that inflation will not peak before. the third trimester. Ford and John Deere released similar information.

The tone was markedly different when it came to profit calls for the big steelmakers. “This last quarter was our best quarter at Nucorof

story, ”said CEO Leon Topalian. Steel Dynamics hailed its “record revenues” and “near-record quarterly steel shipments”. As a reason to be “optimistic for a stronger market for a longer market”, US Steel CEO David Burritt cited “low levels of steel in the supply chain” and “depleted stocks” . There is nothing like the scarcity imposed by the government to allow monopoly rents.

High prices, low supplies and bottom line for steelmakers: it seems like the perfect time to end Mr Trump’s tariffs. The latest jobs report says manufacturing employment fell by 18,000 in April. It is 515,000 below the pre-Covid bar of February 2020. With an automatic pen stroke, Mr. Biden could lift the burden of tariffs of 25% on steel and 10% on aluminum, thus helping the economy to emerge from the pandemic. So what is he waiting for?

If Mr Biden imagines he can make the steel industry great again, it won’t work any better than any of his predecessors who have tried. The graph opposite shows 30 years of employment in the steelworks. Can you spot the rebirth of Mr. Trump? You may need to squint.

That jobs figure was 82,300 when Mr. Trump unveiled his tariffs in March 2018. A year and with changes later, in a strong economy fueled by tax cuts, that number reached 88,300. In in other words, looking at the longer term trend, it was briefly back to where it had been in the heyday of 2015. In the fall of 2019, however, steel prices and jobs were rising. slipped again, long before anyone heard of Covid.

What about the output? In 2017, the United States produced 81.6 million metric tonnes of crude steel, according to the World Steel Association. Jumping the outlier of the year of the plague, in 2019 that figure reached 87.8 million tonnes. It looks like a nice bump, but it’s less than what the US produced in 2014 or 2012 (see nearby graphic). As for “global excess capacity”, Chinese production is up 21% since 2017. Even Covid did not really reduce its growth rate.

Meanwhile, tariffs hurt the industries that buy and use steel, their workers and millions of consumers. A 2019 Federal Reserve article estimated that rising steel prices resulted in the loss of 75,000 manufacturing jobs. For example, Europe’s retaliatory tariffs on Harley-Davidson have led it to move some production overseas.

Another tariff analysis indicated that each new job in steel costs consumers $ 900,000. Tariffs spawned tariffs, as Mr Trump tried to further support steelmakers by levying (illegally, a court later said) additional taxes on imports of metals like nails. Companies that couldn’t revamp their supply chains, perhaps because they needed specialized parts not available in the United States, had to beg – and play politics – for tariff exclusions in Washington.

Mr Trump justified his tariffs by citing national security on the basis of an obscure 1962 law, which was not a credible story at the time and still is not. His own man at the Pentagon said the military only requires 3% of US production of steel and aluminum. Mr. Trump’s protectionism has failed on his own terms, and Mr. Biden will have no better chance of ditching him.

Main Street: Democrats’ proposed tax deduction for the wealthy puts Vermont socialists and low-tax Republicans in the same hole. Images: Getty Images Composite: Mark Kelly

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