Free Trade

At Least 80 Workers Are Losing Their Jobs at This Pennsylvania Steel Plant. Tariffs Are To Blame.

Trump's steel protectionism seems to have failed. Again.


At least 80 employees are being laid off at a western Pennsylvania steel plant, and the facility's owners are not mincing words about why the job cuts are happening.

"We're running less turns and experiencing layoffs now because of tariffs," Bob Miller, president of NLMK Pennsylvania, told the Sharon Herald. Although President Donald Trump's tariffs on imported steel were intended to prop up domestic steelmakers—and despite Trump's repeated claims that the tariffs are bringing steel jobs back to the United States—the tariffs have raised prices and reduced domestic demand for steel. That slowdown has led to shutdowns at other steel plants as well.

Miller told the Herald that tariffs are "a failed policy."

It's increasingly difficult to argue otherwise. Trump announced 25 percent tariffs on imported steel (and 10 percent tariffs on imported aluminum) in March 2018. While the tariffs briefly hiked steel prices and gave American producers an advantage over foreign competitors, it came with a hefty price. Through April l of this year, U.S. consumers and businesses paid about $900,000 for every steel job created or saved by Trump's tariffs, according to an analysis by the Peterson Institute for International Economics.

Now that prices have stabilized again, American steel mills have slowed production and laid-off workers. The Wall Street Journal reported last month that U.S. Steel experienced weaker-than-expected demand and reduced profit expectations in the second quarter of this year. On June 19, U.S. Steel announced that it would shut down two blast furnaces at its flagship plant in Gary, Indiana. The company's stock price has fallen from about $37 per share on June 1, 2018, when the tariffs were enacted, to $14.14 during midday trading on Friday.

The same has happened in other industries that tariffs were supposed to help. As of December, Trump's aluminum tariffs had created an estimated 300 jobs at a cost of $690 million. Two solar panel manufacturers that successfully pushed for new tariffs on Chinese-made solar panels last year are now bankrupt and out of business. And when Whirlpool lobbied the administration to tax imported washing machines, consumers wound up having to pay $1.2 billion more—and higher prices have reduced demand, punishing Whirlpool as well.

Nestled into the hills of northwestern Pennsylvania, about halfway between Pittsburgh and Erie, the NLMK Pennsylvania plant is owned by Novolipetsk Steel, a Russia-based steelmaker that also operates steel plants in Ohio and Indiana. The tariffs have hurt NLMK Pennsylvania because the company routinely imports unfinished steel slab from Russia to be processed and finished for American buyers.

"It is deeply ironic, not to mention painful to out of work steelworkers, that the administration's protectionist steel tariffs have directly caused the layoff of over 80 Pennsylvanians working in the steel industry," Sen. Pat Toomey (R–Penn.), one of the more outspoken congressional critics of Trump's tariffs, said Friday. "Blanket tariffs on steel and aluminum from our allies distort prices, disrupt supply chains, and increase prices for consumers—including downstream users of these products, who collectively employ millions of Americans."

In a petition to the Commerce Department filed last year, the company requested an exemption from the steel tariffs, but the request was denied in April. At the time, Miller told Fastmarkets AMM, an industry publication, that the Commerce Department was effectively treating NLMK's 1,200 U.S. workers as inferior to steelworkers at other facilities.

He's right about that. Why should the federal government care whether a Pennsylvania steelworker is working for an American company or a Russian company or a Chinese company? Doesn't the president always stress that jobs are the most important thing? It's good when foreign investment creates American jobs, but Trump's trade policies are choking off those investments and the jobs they produce.

"The layoffs at NLMK were entirely predictable. Tariffs disrupt supply chains and business models, even in industries the tariffs are supposed to protect," says Iain Murray, a vice president at the Competitive Enterprise Institute and author of a study on the moral and economic case for trade. "The tariffs destroy jobs in industries that use innovative models based around global supply chains. Tariffs slow innovation and it's workers who bear the cost."

Could NLMK simply buy steel slab from American producers instead? No, according to the company's exemption request filed with the Commerce Department. In 2016, for example, NLMK says it was able to source only 2 percent of its needed supply from within the United States.

It took nearly a year for the Commerce Department to make a decision about NLMK Pennsylvania's exemption request—which is pretty typical, as the exemption process is hopelessly bureaucratic, completely nontransparent, and lacking even basic due process protections. In April, when Toomey and Rep. Mike Kelly (R–Penn.) wrote to the Commerce Department to urge the approval of the request, they noted that the delay alone had cost the company more than $160 million.

The response Toomey and Kelly received this week from the Commerce Department is a good example of the bureaucratic nightmare that the exemption process has become. The delay, Commerce Secretary Wilbur Ross wrote, was the result of two different government agencies—the Bureau of Industry and Security, and the International Trade Administration—having to review each exemption request. An additional delay was caused by a lapse in appropriations for the department's review processes. "An effective exclusion request process is an important goal" for the department, Ross assured the two lawmakers.

Toomey shared the news of the NLMK Pennsylvania layoffs on Twitter, and used the opportunity to reiterate his plea for congressional action on tariffs.

That bill would require Congress to approve tariffs imposed under Section 232 of the Trade Expansion Act of 1962, the decades-old law that Trump used last year to enact his tariffs on steel and aluminum. The law allows presidents to act unilaterally to impose trade barriers if there is a national security reason to do, and the Trump administration has stretched the "national security" justification to absurd lengths. Toomey's proposal is one of several bills introduced this year to restore congressional authority over trade and tariffs, but none have been passed by either chamber.

"The announced layoff was an entirely predictable consequence of a failed policy," says Clark Packard, a trade policy expert with the R Street Institute. "Tariffs are a really ineffective tool to revitalize a domestic industry."