Martin Meissner, AP
A train carries steel slabs at the Krupp Mannesmann steel factory in Duisburg, Germany, Friday, March 2, 2018. U.S. President Donald Trump risks sparking a trade war with his closest allies if he goes ahead with plans to impose steep tariffs on steel and aluminum imports, German officials and industry groups warned Friday.

Reaction to the Trump administration’s proposal to enact tariffs on steel and aluminum imports has skewed substantially to the negative, with criticism coming from economists, industrial leaders and congressional heads on both sides of the aisle. The stock market, too, is showing signs of worry over the repercussions of a potential trade war.

Even those who find reason to support the move should be concerned about whether such a protectionist stance is good for the economy as a whole, and by the impulsive manner in which the plan was hatched to appeal to the president’s political base.

The U.S. steel industry, which stands to benefit from tariffs, has said the plan has already resulted in new orders for production. But it’s important to note that prior to the announcement, the domestic steel business was hardly in a tailspin. According to the Commerce Department, steel companies have had positive cash flow 14 of the last 19 years. Nucor Steel, with a large presence in Utah, has been profitable for 19 of the last 20 years. Last year, the industry earned more than $2.8 billion, up from $714 million the year before.

The administration has argued the move is necessary to protect jobs, and it is true that employment in the steel industry has been down or stagnant. However, even though employment dropped 35 percent between 1998 and 2016, production capacity has remained the same, which speaks to more efficient manufacturing techniques rather than the influence of foreign producers.

As for foreign influence, it’s true that China has flooded the world steel market with product made cheaper by government subsidizations. But Chinese imports account for only about 2 percent of U.S. steel imports, compared to about 18 percent from Canada and about 21 percent from the European Union. The tonnage of steel imported from Brazil, South Korea and Mexico dwarf the amount that comes from China. That the U.S. receives a large amount of product from closely allied nations with whom it has had long and successful trade relations diminishes the president’s argument that a protectionist approach is necessary for national security. Under no reasonable interpretation of current market trends is the nation likely to become dependent upon steel or aluminum from potentially hostile foreign powers.

The immediate and vociferous protests of the tariff proposal have apparently led the administration to ratchet back its rhetoric and replace it with a softer approach, including exemptions for some nations. That’s good to see, but it also raises questions about the genesis of the plan, which clearly emanated from Trump’s campaign promises to make “America First” and stop jobs from migrating overseas.

17 comments on this story

The president may be adept at convincing his supporters that the tariffs will preserve or even expand employment in the manufacturing sectors, but there is no credible evidence to support that notion. On balance, it’s clear that for the most part, a posture of open trade has brought substantial benefits to the U.S. economy, which is currently humming along at a vigorous pace. We would expect the nation’s trade policy be less about political theater and more about addressing real-world problems.