Donald Trump

How Trump's Steel Tariffs Harm America

The American people will suffer more than the moguls in the steel industry will benefit.


In light of President Donald Trump's announcement of new tariffs for China, I thought I'd share one thing I've learned this year about those who believe in protectionism. Don't be fooled; even though they claim that America benefits from protectionist policies, many of them know that those policies hurt us all. Occasionally, they even admit it in public.

Here's a recent example. A few weeks ago, Commerce Secretary Wilbur Ross expressed his opinion that everyone should relax about the Trump administration's giving a handout to its friends in the steel industry, because the tariffs will only hurt our whole nation a little. The pain, he says, will be "negligible." That's easy for him to say from the comfort of his federal government office.

As my colleague and trade expert Christine McDaniel noted at the time, trade economists know full well that the size of the nationwide estimate used by the secretary to justify the president's import tax is pretty irrelevant. Yes, economy-wide effects of import taxes on a good in one particular industry are understandably very small when measured against our giant economy and all industries put together.

What really matters is that on net, the economy, the American people, and American firms will suffer more than the steelworkers and moguls in the steel industry will benefit. What Ross, of course, forgot to mention is that the specific impact of the steel tariffs on those workers and firms in steel-consuming industries is not only negative but large.

As if the carelessness of our commerce secretary weren't enough, I draw your attention to a new report by a steel lobbyist group called the Coalition for a Prosperous America. It argues that the Trump tariffs on steel and aluminum imports will create 19,000 jobs and reduce the United States' gross domestic product by only $1.4 billion.

First, let's consider these findings in the most favorable light. Let's assume that the tariffs will actually produce 19,000 jobs. Let's also assume that the creation of these jobs will cost only $1.4 billion in economic growth. As George Mason University economist Donald Boudreaux notes, "each job created will cost $73,684 (which is $1.4 billion divided by 19,000). The typical worker in a steel mill earns in annual wages about $55,556. If we assume that this worker gets another 20 percent of this pay in the form of fringe benefits, each steel-mill worker, on average, is annually paid about $66,667. It appears, therefore, that the price we Americans will pay per job created will be roughly $7,000 more than each of these jobs is worth." That's not a good thing.

I suspect that like Ross, the lobbyists believe that this isn't a high cost for us to pay. But as Boudreaux rightfully adds, "this same reasoning, were it valid, would also justify pickpocketing, as the negative impact of pickpocketing on U.S. GDP is likewise very tiny."

Second, as the Mercatus Center's trade policy co-director Dan Griswold also commented upon reading the report, "if the number of workers goes up, and total output goes down, is it not simple math that output per worker (or per hour worked) has gone down?" Yes, it is. That means that the workers' productivity has gone down and that their wages will, too.

In other words, the Coalition for a Prosperous America might say, yes, Americans are losers, but they should just relax about their big losses, as the steel industry will have the tiniest gain.

To make matters worse, it's hard to take that study seriously in the first place, considering that the head of the Coalition for a Prosperous America is the chairman emeritus of Nucor, which, as the biggest steel company in the United States, stands to benefit the most from the import tax. It's even harder to take the study seriously when one knows what happened when the United States imposed steel tariffs in 2002. It's questionable as to whether those tariffs created any net jobs in the steel industry, and they clearly caused the destruction of more jobs in steel-consuming companies than were employed in the entire steel industry at the time. We're talking about some 200,000 workers losing their jobs.

Americans must wake up. When government officials and special interests are so confident that we'll let them pick our pockets without any resistance—even when they tell us they're robbing us—you know things have got to change.