Trump’s Steel and Aluminum Tariffs

Trump's Steel and Aluminum Tariffs
Trump's Steel and Aluminum Tariffs

U.S.A.-( There are a couple of important economic lessons that the American people should learn. I'm going to title one “the seen and unseen” and the other “narrow well-defined large benefits versus widely dispersed small costs.” These lessons are applicable to a wide range of government behavior, but let's look at just two examples.

Last week, President Donald Trump enacted high tariffs on imports of steel and aluminum. Why in the world would the U.S. steel and aluminum industries press the president to levy heavy tariffs? The answer is simple. Reducing the amounts of steel and aluminum that hit our shores enables American producers to charge higher prices. Thus, U.S. steel and aluminum producers will earn higher profits, hire more workers and pay them higher wages. They are the visible beneficiaries of Trump's tariffs.

But when the government creates a benefit for one American, it is a virtual guarantee that it will come at the expense of another American — an unseen victim. The victims of steel and aluminum tariffs are the companies that use steel and aluminum. Faced with higher input costs, they become less competitive on the world market. For example, companies such as John Deere may respond to higher steel prices by purchasing their parts in the international market rather than in the U.S. To become more competitive in the world market, some firms may move their production facilities to foreign countries that do not have tariffs on foreign steel and aluminum. Studies by both the Peterson Institute for International Economics and the Consuming Industries Trade Action Coalition show that steel-using industries — such as the U.S. auto industry, its suppliers and manufacturers of heavy construction equipment — were harmed by tariffs on steel enacted by George W. Bush.

Politicians love having seen beneficiaries and unseen victims. The reason is quite simple. In the cases of the steel and aluminum industries, company executives will know whom to give political campaign contributions. Workers in those industries will know for whom to cast their votes. The people in the steel- and aluminum-using industries may not know whom to blame for declining profits, lack of competitiveness and job loss. There's no better scenario for politicians. It's heads politicians win and tails somebody else loses.

Then there's the phenomenon of narrow well-defined large benefits versus widely dispersed small costs. A good example can be found in the sugar industry. Sugar producers lobby Congress to place restrictions on the importation of foreign sugar through tariffs and quotas. Those import restrictions force Americans to pay up to three times the world price for sugar. A report by the U.S. Government Accountability Office estimated that Americans pay an extra $2 billion a year because of sugar tariffs and quotas. Plus, taxpayers will be forced to pay more than $2 billion over the next 10 years to buy and store excess sugar produced because of higher prices. Another way to look at the cost side is that tens of millions of American families are forced to pay a little bit more, maybe $20, for the sugar we use every year.

You might wonder how this consumer rip-off sustains itself. After all, the people in the sugar industry are only a tiny percentage of the U.S. population. Here's how it works. It pays for workers and owners in the sugar industry to come up with millions of dollars to lobby congressmen to impose tariffs and quotas on foreign sugar. It means higher profits and higher wages. Also, it's easy to organize the relatively small number of people in the sugar industry. The costs are borne by tens of millions of Americans forced to pay more for the sugar they use. Even if the people knew what the politicians are doing, it wouldn't be worth the cost of trying to unseat a legislator whose vote cost them $20 a year. Politicians know that they won't bear a cost from sugar consumers. But they would pay a political cost from the sugar industry if they didn't vote for tariffs. So they put it to consumers — but what else is new?

About Walter E.WilliamsWalter E.Williams

Walter E. Williams is a professor of economics at George Mason University. Williams is also the author of several books. Among these are The State Against Blacks, later made into a television documentary, America: A Minority Viewpoint, All It Takes Is Guts, South Africa's War Against Capitalism, More Liberty Means Less Government, Liberty Versus The Tyranny of Socialism, and recently his autobiography, Up From The Projects.

  • 8 thoughts on “Trump’s Steel and Aluminum Tariffs

    1. We just bought new dining room chairs and you would not believe the number of chairs flooding the market that are made in China. Reviews were not very good on them because of missing parts, unlevel legs, etc. We bought from a U.S. company with the made in U.S.A. sticker. It doesn’t matter what you try to buy there is always a Chinese knockoff ready to rip you off. If you do buy Chinese you will play h*!! getting anything fixed. No speaka no english.

    2. I have no problem with “targeted” tariffs. If someone or a country is violating trade agreements or performing other inappropriate practices then targeted tariffs to force compliance or compel better actions can be appropriate and acceptable. But to argue that we need these tariffs because the Chinese are dumping below grade steel made by slave labor, even if it is true (likely it is), when Chinese steel only makes up about 3% of all steel used in the U.S. is a false argument and deceitful.
      Why punish everyone when only a select country is the bad actor? The reason is that the steel industry doesn’t want to compete in a capitalist market place. They prefer a rigid market as described by Mr. Williams. Either we believe in free market capitalism or we don’t. Targeted tariffs work in free market capitalism to keep bad actors out or to reform them. Broad tariffs don’t work in free market capitalism since it is only protectionism of individuals or industries that can’t compete in a capitalistic market and prefer a government structured market to capitalism for their own benefit, not the benefit of the American people.

      1. @Mark D, I believe that if we do not have a steel and an aluminum industry when the next world war comes to us, we will lose. And if you are less than sixty years old when WWIII occurs, you will be a participant.

    3. Someone said that if Americans focused $40/ month towards American made items we could employ 250,000 more Americans.
      Not sure of the accuracy, but with 300M+ American consumers, it’s not unlikely.

    4. Mr Williams is correct that the tariffs will raise prices for American Made steel and aluminum products. That is unfortunate, but necessary.
      The Chinese are able to keep prices lower by using slave and severely under-paid labor and creating inferior products. Quality costs.
      I use and buy American whenever possible, I’m unimpressed by Chinese butter steel. I prefer knives that are sharp, and fasteners that don’t strip or round off. If all your interest is that something cost less, the Chinese see you coming.
      It was said that Capitalists will sell you the rope to hang them. The US did that when it entered a trade war with China and refused to fight it.
      Remember the Chinese General, several years ago, who said that they were already at war with the US – and then was never seen or heard from again. If only one side fights a war the result is inevitable. The choice is to fight or learn Mandarin.

    5. I buy USA made products when possible. All my hunting knives and pocket knives are made in the USA, including the steel. I willingly pay more to not give my money to the Chinese.

      When I find Chinese products and their is an American made equivalent, I make a point to buy American. If I am at a store that doesn’t carry American, I make it a point to let them know that I am not buying at their store for that reason. Unfortunately, with certain products, one can’t avoid foreign/Chinese made.

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