Commerce Secretary Wilbur Ross Should Shut Up About Soup Cans, Already

If he believes this economically illiterate nonsense, he shouldn't be trusted to run the Department of Commerce. If he doesn't believe it, neither should you.


Chris Kleponis—CNP/Newscom

Commerce Secretary Wilbur Ross has been carrying a can of Campbell's soup to television studios all over Washington, D.C., this week as he makes the case for tariffs on steel and aluminum imports.

"Let's put it in perspective," he said during one such appearence on Fox Business. "There's about 10 cents worth of tin plate steel in this can. So if it goes up 25%, that's a tiny fraction of one penny. That's not a noticeable thing."

Not a noticeable thing? Maybe that's true when your "perspective" is reduced to the size of a single can of soup. Blown up to it's proper scale—the United States' steel imports during 2017 were valued at more than $29 billion—an increase of 25 percent looks, well, a little bit more significant. The 25 percent steel tariff (and a 10 percent tariff on aluminum) that President Donald Trump signed Thursday will increase costs for businesses and consumers, will likely trigger job losses in industries that consume steel and aluminum, and may trigger a trade war with Europe.

Surely Ross knows this. He's the secretary of commerce. He's got degrees from Yale and Harvard Business School. He's worked for investment banks and run a private equity firm. Somewhere along the way, he must have taken a class or two in macroeconomics and learned about the distorting effects that tariffs have on national economies.

But you wouldn't know it if you listened to him over the past two weeks.

"He intentionally makes it sounds as if it is nothing when the overall cost to any particular industry is actually a much bigger deal," says Reason columnist Veronique de Rugy, a senior research fellow at the Mercatus Center.

For starters, Ross' math is wrong. A 25 percent increase on something that costs 10 cents is not "a tiny fraction of one penny." It's more than 2 cents. But on other appearences—like this one on CNBC, where he wondered "who in the world is going to be too bothered" by a small increase in the price of soup—Ross has claimed that a soup can contains 2.6 cents worth of steel, so maybe he's confused about how tariffs will affect Campbell's soup.

Campbell's, by the way, is not laughing off the tariff the same way Ross is.

"Any new broad-based tariffs on imported tin plate steel—an insufficient amount of which is produced in the U.S.—will result in higher prices on one of the safest and more affordable parts of the food supply," the company said in a statement.

Mathematics aside, Ross' larger point is either woefully illiterate of economics or deliberately misleading.

Ross assumes that companies can pass all the cost onto consumers or absorb the original cost increase without reducing their consumption of steel or aluminum or of labor, and without deciding to move their production outside of the United States.

"How can he assume," de Rugy says, "that lower profits resulting from higher costs have no impact what companies do and on how many workers they can hire or keep employing?"

While American steel manufacturers would benefit from the tariffs, a far larger slice of the economy would be hurt. According to 2015 Census data, steel mills employ about 140,000 Americans and add about $36 billion to the economy, but steel-consuming industries employ more than 6.5 million Americans and add $1 trillion to the economy.

Trump's tariffs could grow the steel, iron, and aluminum industries by about 33,400 jobs, according to a policy brief released this week by the Trade Partnership, a Washington-based pro-trade think tank. On the flipside, the tariffs are projected to wipe out more than 179,000 other jobs. That's about 146,000 net job losses—or five jobs lost for every job gained.

No matter how inexpensive a can of soup might be, it becomes significantly harder to purchase one if you don't have a job.

This isn't theoretical. The effects of tariffs are well-documented. Barack Obama's tariffs on Chinese tires cost American consumers an estimated $1.1 billion in return for preserving 1,200 jobs in the domestic tire industry. When George W. Bush put tariffs ranging from 8 percent to 30 percent on steel imports, it dealt a $4 billion hit to the economy and led to 200,000 job losses.

Is that what Ross means when he says a steel tariff is "not a noticeable thing"?

This isn't just bad economics; it's bad politics. Ross' soup-can schtick comes off as uninformed and painfully out of touch. It's no different from what happened after Republicans passed their tax bill in December: Those tax cuts will save the average American about $1,000 annually, but Democrats such as House Minority Leader Nancy Pelosi (D-Calif.) attacked those savings as "crumbs." Now it's Republicans making themselves look foolish for assuming that everyone can absorb an unnecessary, government-imposed hit to their wallets.

Does Ross really believe the sales pitch he's been making for Trump's tariffs?

If he doesn't, then neither should you. And if he does believe it, he's too economically illiterate to be trusted to run the Department of Commerce. Maybe he can be reassigned some place where numbers don't matter. Like the Pentagon.

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  1. Damn, Red Foreman from That 70s Show has really let himself go.

    1. Insult Annorax at your peril.

    2. He looks like an Angry Old Raisin!

  2. Trying to see a silver lining – is Trump simply giving himself leverage in future trade talks?

    “So you see that we can wage a trade war if we need to. So let’s get a trade agreement that’s fair to both sides, including giving us access to your yuge markets.”

    1. He’s going to grab them by the markets?

    2. It is amusing. Obviously they know what they’re doing. Boehm even points that out.

      1. There is nothing obvious about the Trump admin. But thats part of the fun of watching it.

    3. Is this next, next level chess?

  3. There’s about 10 cents worth of tin plate steel in this can. So if it goes up 25%, that’s a tiny fraction of one penny.”


    1. Ross likely sees flouting mathematics in this manner much as Trump sees random capitalization — they’re flashing ‘I’m with you’ gang signals for the half-educated, disaffected, backward rubes who constitute the base of the current Republican-conservative electoral coalition.

      Half the reason these gullible yahoos ardently supported Trump was belief that he would rework economic fundamentals to enable poorly educated, unskilled white rural males to proper — and, perhaps more important, to do so at the expense of the fancypants elites residing in modern, successful communities . . . the ones who always had the answers in math class and became familiar with standard English, then left town at high school graduation for some snooty university, never to return.

  4. Christ, what an idiot.

    1. He’s much, much worse than that.

  5. The truth that no one, including the author seem to see, is there will likely be a drive to find replacement materials if the steel is too expensive to be profitable. That obviously won’t be possible in many situations, but Campbell’s probably isn’t one of those.

    How that will end up changing the numbers is anyone’s guess, but using current metrics to measure the impact probably gets it wrong.

    1. So it’s like Jeff Goldblum’s (sexy) chaos theory speech in Jurassic Park?

      1. More like Ben Stein’s boring monologue.

    2. Any Trumpian tariffs are unlikely to last more than a few days longer than the Trump presidency. That seems unlikely to generate enough time for contorted adaptation.

  6. “Economic nationalism” is delusional in 2018. The economy is global. That’s not going to change. The existing global economy can either be improved (it has already improved standard of living around the globe), or we can pretend that obsolete ideas will bring back the industrial revolution in the U.S.

    1. Thanks for the vapid high-school freshman level analysis, but MSNBC does it better.

  7. Why the fuck is everyone talking about cans of beer and soup? Of course it’s not going to have a significant impact on prices because of packaging costs. How about the effects on heavy manufacturing and commercial construction?

    1. Pretty sure you just answered your own question.

  8. “How can he assume,” de Rugy says, “that lower profits resulting from higher costs have no impact what companies do and on how many workers they can hire or keep employing?”

    Easily. Just pass a law preventing companies from passing on extra costs or laying off workers. Jeez, do I have to think of everything around here?

    1. If you like your can of soup you can keep your can of soup. Yes you can.

      1. You can keep your can of soup. The government gets to decide where you get your can of soup inserted.

  9. The 25 percent steel tariff (and a 10 percent tariff on aluminum) that President Donald Trump signed Thursday

    Listen, how many damn times does Ken Shultz have to tell you that you’re an idiot if you believe anything that Trump tweets?

    1. Excellent point. Trump spews a lot of bad policy ideas, and he follows through with at least some of it.

      -1 chess dimension
      Current chess dimension: 23-D


  11. Can we just get rid of the Department of Commerce instead?

    1. Why do you hate commerce?

      1. Beclause

    2. Yes

  12. Are you people just being purposefully misleading or are you really this stupid?

    There will be no trade wars, the sky will not be falling. In a matter of months, if not weeks you will see the tariffs and duties that these other country’s place on American goods (which for some suspicious reason no one is reporting on the existence of) be significantly reduced or go away all together.

    You really need to stop with the high brow BS. It clearly doesn’t suit you.

    1. …..Not even to mention the VAT taxes that the governments of some countries, by design and by intent, administer in such a way that they act as a de facto but unofficial tariff on imports — selectively by goods imported from specific countries or broadly on the imported goods of all countries but with a much smaller VAT being levied on domestic producers of competing goods.

  13. “There’s about 10 cents worth of tin plate steel in this can. So if it goes up 25%, that’s a tiny fraction of one penny. That’s not a noticeable thing.”

    This quote is lifted from the Fox webpage, but if you listen to the guy’s interview, you’ll see that he actually said 3 cents, not 10 cents.

    Still, his arithmetic is wrong. 25% * 3 cents = 0.75 cents. 0.75 cents is not “a tiny fraction”.

    Okay, let’s just allow that his “perspective” is correct, and the soup can is representative of consumer costs. The cost increase on the $1.99 can of soup is about 0.4%. So what he’s saying is that he’s perfectly willing to make consumers 0.4% poorer if he can enrich the steel industry.

    He’s as clueless as a Pelosi.

    1. …..Okay…..That’s an approximate cost increase for the can used for packaging a can of soup. Now, how much do you reckon the increase in production cost will be for something like a Caterpillar D11 bulldozer. Or has Caterpillar already moved production of their machines outside the U. S. in order to be able to be more price competitive? Or maybe the steel beams needed to build or repair a bridge?

  14. “A 25 percent increase on something that costs 10 cents is not “a tiny fraction of one penny.” It’s more than 2 cents…” Yes, but if you add in the cost of the actual product, which is why the can exists in the first place, the fraction does indeed become quite small.

    But what really bothers me about Reason is that they clearly have an agenda. Nothing wrong with having an agenda, but I sure wish they’d share with us what it is. Reason is far from an impartial observer of reality here. If it was, it wouldn’t avoid mentioning the numerous other tariffs already in place. Reason would do a service by explaining why tariffs are bad when Trump does it, but not worth Reason’s notice or concern when anyone else does it.

    1. Umm, Reason is a Libertarian publication. That’s hardly a secret.

      Free trade, which is basically a cornerstone of the free market (which is alluded to in Reason’s very tagline) is a basic tenet of libertarianism. Show me a Libertarian with strong protectionist impulses and I’ll tell you you are not looking at a Libertarian but probably just a fiscally-prudent Democrat (if those still exist) or a Republican who likes to smoke pot.

      As for Reason supporting other administrations when they promote tariffs and various trade restrictions…can you provide some citations? I’m quite doubtful.

    2. “Yes, but if you add in the cost of the actual product, which is why the can exists in the first place, the fraction does indeed become quite small.”

      For the guy who manufactures the cans, the actual product is the can, and he is going to have to raise his price a bit more drastically. Will Campbells will pay it, or will they decide now’s the time to switch to soup in, say, a plastic pouch? If that happens, and similar things happen in other industries, lessening the demand for steel, what will that do to the precious steel and aluminum jobs?

  15. It’s entirely possible that Ross, despite his Ivy League education, is that dumb. I’ve worked with people who had not one but multiple master’s degrees, and they were no smarter than the average person off the street with a 80-100 IQ. A lot of higher education is simply parroting back on term papers what you’ve read in assignments chosen by the professors. Critical thinking rarely enters into the picture, and may be unwelcome when it does.

    And then there’s that saying that you are the average of the half dozen people you spend the most time with. This guy spends his days surrounded by a troupe of career bureaucrats and sycophants. His native intelligence, such as it is, has probably dropped like a rock since he left the private sector.

    1. Ross went to B-school when the “Case Study” method was at its height. You didn’t parrot anything back – you had to study the case and come up with recommendations that you could defend. No two students ever came up with exactly the same ones. No, he isn’t dumb, he’s currying favor by deflecting criticism of his boss’ politically-calculated proposal.

  16. And the 10% luxury tax in the late 1980s would have no effect on jobs (nyuck, nyuck, nyuck). Well actually nearly 20,000 people were laid off the boat industry because of this tax on the rich “who could afford it”, but decided they were not going to pay it and bought their boats from overseas builders.

    Why can’t politicians get it right? Something in the water in Washington?

    1. John Kerry buoys American. “Can I get me a boatin license?”

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  18. And the policies of the last 40 years have ben working so well.

  19. …..Regardless of the marginal cost increase, those domestic producers who use aluminum and steel for either products components or for the packaging of their goods that are produced in The United States will now find it marginally more difficult to compete with producers who produce elsewhere either for our retail markets or for international sales.
    The tariff may not cause much of an increase in the production cost of a can of Campbell’s soup but about how much do you reckon it will add to the production cost of something like a Caterpillar D11 dozer? And then, is the next “move” changes in monetary policy by The Federal Reserve in an effort to “stimulate” GDP growth or maybe changes in fiscal policy by Congress for the same purpose?

    1. How much do you reckon it will add to the production cost of something like a Caterpillar D11 dozer?”

      Not much, if they move their plants to Mexico, where the price of their steel will NOT be artificially pumped up.

  20. I want my soup in a different container anyway.

  21. Always letting the Perfect be the Enemy of the Good, is the Libertarian Curse.

  22. I think our Politicians should be way more worried about the Fed’s policy of 3-4% inflation than the 2 cents on the price of steel for a soup can. Inflation effects everything we buy and eats away at our earnings and savings. Yet it won’t happen, inflation is a hidden tax and helps the government out with their massive deficits.

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