Tariffs Aren't Saving Steel Towns

And it's cruel to tell people that government policy can reverse the decline.


Thomas Robbin imageBROKER/Newscom

Halfway between Pittsburgh and Cleveland, Youngstown is the buckle on the Rust Belt.

It's a town that rose with America's steel and coal industries and, like so many other cities in that part of the country, began to fall from prominence when technology and cheaper foreign steel lessened demand for the American stuff. Donald Trump held a major rally in Youngstown during the summer of 2016, and returned there as president last summer for a victory tour. Blue collar hagiographies have been written about the days when the steel mills were running full tilt, and political journalists have safaried there in an attempt to understand the working class collapse and subsequent political uprising that's often credited with getting Trump to the White House.

If there is any place in America that stands to benefit from the Trump administration's decision to slap tariffs on steel and aluminum imports—a policy that will cause significant pain for millions of workers in thousands of other places—it should be towns like Youngstown. After all, Trump himself has proclaimed that "if you don't have steel, you don't have a country" as justification for the tariffs, which have been warmly welcomed by American steel manufacturers.

And yet, the tariffs are not turning things around in Youngstown. They're not turning things around in most of the other major steel-producing cities of America, either.

Data from the Bureau of Labor Statistics shows that employment in Youngstown is down 1.6 percent (a net loss of about 3,600 jobs) since March of last year. Across the 10 largest steel producing cities in America, hiring has been slow or nonexistent in the month following Trump's tariff announcement, The Wall Street Journal reported this week, citing both BLS and Brookings Institution data.

"While many of the cities had already been experiencing anemic employment growth before the tariff announcement, some saw their jobs numbers worsen after it," the Journal reports.

Even in steel towns that are growing—like Reading, Pennsylvania, and Canton, Ohio, both of which have seen modest employment growth in the past year—the uptick is smaller than across the U.S. economy as a whole, which has grown at a rate of about 1.5 percent since March 2017.

Trump's steel tariff has caused a spike in prices since early March, which means American steel manufacturers are charging more. Those higher costs get passed along to steel-consuming industries and, ultimately, to consumers.

The employment data suggests that steelmakers have either held off on hiring additional workers—perhaps because it takes time to bring additional supply on-line, or perhaps because they worry that the tariff-caused spike in prices won't last if the administration shifts trade policies again—or that those hires have not been significant enough to stop the decline of places like Youngstown.

It's unlikely that steel protectionism will produce booming job growth for another reason. Steelmaking is a relatively small part of the American economy. According to 2015 Census data, steel mills employed about 140,000 Americans and added about $36 billion to the economy that year. Meanwhile, steel-consuming industries (the ones suffering the most from Trump's tariffs) employed more than 6.5 million Americans and added $1 trillion to the economy.

Finally, Trump's tariff policy overlooks the fact that it was technology, not trade, that drove the decline of steel towns like Youngstown. According to a study published by the American Economic Review in 2015, the steel industry lost 75 percent of it's workforce between 1962 and 2005, even though the amount of steel produced by American mills actually increased during that period.

The population of Youngstown peaked at 170,000 in the 1930s. Today, fewer than 65,000 people live there. Tariffs won't reverse the economic and cultural trends driving that 80-year decline, but they will do a lot of damage to other industries that could help fill the gap. A projection released by the Trade Partnership, a Washington-based pro-trade think tank, says Trump's steel and aluminum tariffs will cause 146,000 net job losses—five jobs lost for every job gained.

"If protectionism could bring back neighborhoods, and nuclear families, and life-long employment, it'd be well worth discussing," Sen. Ben Sasse (R-Neb.) said Wednesday during a discussion of trade issues at the Heritage Foundation. "It is fundamentally cruel to lie to people and say 'by government policy, we're going to make your communities stable again.'"