Free Trade

More Layoffs, Falling Stock Prices Show How Trump's Tariffs Have Harmed American Steelmakers

A Michigan steel plant annnounced it's closing at the end of the year, while U.S. Steel stocks are down 75 percent since Trump's tariffs were announced.

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If President Donald Trump's tariffs were supposed to resurrect American steelmakers, there is no doubt they have failed to accomplish that goal.

This week's bad news comes from Rothbury, Michigan, where the Barber Steel Foundry will close at the end of the year, leaving 61 people unemployed. A spokesman for the company, which is owned by the Pennsylvania-based Wabtec Corporation, told Michigan Live that the closure is due to "declining business conditions."

It's the latest in a long run of bad news for U.S. steelmakers. In July, NLMK Pennsylvania, a subsidiary of a Russian-owned steel company, announced that it would layoff 80 workers amid slowing production. Plant president Bob Miller said the plant's inability to win exemptions from tariffs were to blame for the lost jobs.

That followed the June 19 announcement by U.S. Steel that it would shut down two blast furnaces at its flagship plant in Gary, Indiana. The company has also laid off workers and slowed production at a plant in Michigan.

If the problems were contained to layoffs at a few steel mills, they could be explained away by other factors—or written off as mere anecdotes. But as you zoom out from those small-scale problems to look at the industry as a whole, it becomes even more obvious that there is no steel resurrection taking place, despite what Trump has promised would happen.

That's…not happening.

Domestic steel prices spiked in the months after Trump imposed his tariffs on imported steel, but the higher prices (and larger issues, including the uncertainty created by Trump's trade war) slackened demand for steel and prices have now fallen below pre-tariff levels. Lower prices have translated into less revenue for steelmakers, and the jolt once provided by the tariffs is now gone. The three biggest U.S. steelmakers—Nucor, Steel Dynamics, and U.S. Steel—are all expected to fall short of their third quarter projections.

U.S. Steel seems to be in particularly bad shape. In a warning to shareholders issued last week, the Pittsburgh-based company said it expects to lose 35 cents per share during the third quarter, after previously projecting losses of just 6 cents per share. Since the steel tariffs took effect in March 2018, U.S. Steel's stock has fallen by a whopping 75 percent—from a high of $45 in the days after the steel tariffs were announced to a value of just $10.50 per share on Tuesday morning. Nucor stock is down about 25 percent since March 2018, while Steel Dynamics has seen a 30 percent drop.

As Clark Packard, a trade policy expert with the R Street Institute, a free market think tank, said in June: "Tariffs are a really ineffective tool to revitalize a domestic industry."

Indeed, it's not only steel that's taken a hit when it was supposed to be getting saved. Trump's tariffs on imported aluminum created an estimated 300 jobs during 2018 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.

The jobs that have been created by Trump's tariffs have come at a heavy cost. According to the Peterson Institute for International Economics, a pro-trade think tank, U.S. consumers and businesses paid about $900,000 for every steel job created or saved by Trump's tariffs.

It is well past time to stop believing that tariffs are going to resurrect or save the American steel industry. Trump has given little more than false hope and faulty economics to the steelworkers and other blue collar employees for whom he's promised a return to the good old days. The slow decline of American steelmaking cannot be halted or reversed by executive order or presidential tweet.

Unfortunately, most of the Democrats running to unseat Trump in 2020 are promising the same sort of protectionism. The beatings, it seems, will have to continue until morale improves.

NEXT: Why Does the Popular Social Media App TikTok Have Almost No Hong Kong Protest Footage?

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  1. Nobel Prize winning economist Paul Krugman foretold this when he spoke of “a global recession, with no end in sight” immediately following Drumpf’s victory.

    Want another devastating statistic? Reason’s billionaire benefactor Charles Koch has seen his net worth stagnate at a totally unacceptable $59 billion because of Drumpf’s tariffs and immigration restrictions. So we’ll need to be especially generous when the annual donation drive comes around.

    1. With you I’m not shy, to show the way I feel
      With you I might try, my secrets to reveal
      For you are a tariff, and I am steel

  2. Hmm- I beat the lackeys to the punch before they could tell Eric he is all wrong for….reasons.

    1. It’s pointless to try to have a rational argument with mindless partisans like Eric or you. All one can do is mock you.

      1. Yes, this is a universal truth in internet commentary-land… When faced with overwhelming logic, rationality, and the evidence of one’s senses… Such as is the case with, freer trade for all, is FAR better for all, than un-free trade… Then ALL that can be done, by those on the WRONG (protectionist) side of the argument, is to mock those who are on the RIGHT side of the argument.

        In the heads of wrong people, “rational” = “those who agree with me”.

    2. Yeah trolls. Eric Boehm should do more DOW Jones articles.

      MARKETS IMPLODING!

      hahaha

  3. Damn those unpatriotic steelmakers! And damn the media for reporting on their unpatriotism! Everyone needs to get behind whatever Trump says!

  4. U.S. Steel seems to be in particularly bad shape.

    Good to see all those lobbyist bribes are really paying off. Should have spent that money getting rid of their union and become a merit shop.

    1. That is and always has been the real root of the problem.

  5. Well, obviously, according to libertarian “Reason” magazine, any federal policy that doesn’t create a stock market bubble or lift the stock price of favored industries must be a failure!

    1. So the goal of the tariffs was to boost the fortunes of US steel companies. No? If that goal has not been met and instead the opposite has happened, what would you call that? Success?

      1. Suck-cess is whatever sucks Trump’s dick!

      2. Look, Trump couldn’t impose tariffs to benefit US companies if he wanted to. The point of tariffs has been to put pressure on China for negotiations, in order to get China to change its conduct in international trade. Those negotiations haven’t finished yet. Americans are supposed to benefit from the outcome of the negotiations, not the tariffs. The negotiations may succeed or they may fail but they are certainly worth attempting.

        Eric is just an ignorant moron for presenting this as “Trump’s tariffs don’t help US steel mills”.

    2. Don’t be ridiculous. Stock market bubbles are just a side effect. Suppressing wages and destroying middle class savings is the actual goal.

  6. Boehm’s gonna create a narrative that the US steel industry is dying, even if he has to make it up. Per the latest figures from American Iron and Steel Institute website:

    “The American Iron and Steel Institute (AISI) reported today that for the month of July 2019, U.S. steel mills shipped 8,115,103 net tons, a 5.1 percent increase from the 7,718,499 net tons shipped in the previous month, June 2019, and a 2.6 percent increase from the 7,911,228 net tons shipped in July 2018. Shipments year-to-date in 2019 are 56,338,348 net tons, a 2.0 percent increase vs. 2018 shipments of 55,215,285 net tons for seven months.

    “A comparison of July shipments to the previous month of June shows the following changes: cold rolled sheets, up 9 percent, hot rolled sheets, up 6 percent, and hot dipped galvanized sheets and strip, no change.”

    https://www.steel.org/news/2019/09/july-steel-shipments-up-5-point-1-percent-from-prior-month

  7. Nucor’s dividend warning doesn’t sound half as dire as Boehm makes it out to be. Yeah, prices for some steel products are soft, but prices for others are strong and Nucor expects to remain profitable.

    https://nucor.com/news-release#item=16816

  8. I think this is what Boehm is really upset about: Imports are down 11% from last year.

    https://www.steel.org/news/2019/08/steel-imports-down-11-percent-year-to-date-through-july

  9. Ya gotta love Reason’s selective outrage here.

    If Barber Steel Foundry had closed its doors due to cheap Chinese imports, Boehm’s article would have been “Sucks to be you, that’s how the free market works. Better learn to code now, hicks.”

    But as soon as their demise could plausibly be blamed on the Orange Man, Boehm goes all Hillbilly Elegy and laments the loss of…*checks notes*…61 jobs.

    1. The market is resilient enough to handle socialized medicine and 30 million illegal immigrants, just not a tiny fractional tax on imports.

    2. Boehm is all over the place as long as he gets a paycheck.

      Propagandists are like that.

  10. According to US Steel, the reason for temporarily idling their pig iron plant in Gary was that the flooding on the Mississippi River was making it difficult to ship products by barge to their customers.

    USS/Europe also idled a pig iron smelter due to low demand

  11. BS DETECTOR —- Wait, Wait…. Exactly how is it even remotely possible that !!!! —- foreign —– !!!! tariffs could possibly have any effect on –> “American Steelmakers”!!

    Oh, that’s right — Its not *really* American Steel they’re making – that’s just on the misleading label.

    U.S. Gold for sale !! [mini-label at the bottom] “made in china”.

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