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Tariffs Aren't Saving Steel Towns

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

Thomas Robbin imageBROKER/NewscomThomas Robbin imageBROKER/NewscomHalfway 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.'"

Photo Credit: Thomas Robbin imageBROKER/Newscom

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  • John||

    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.

    If technology, not trade drove the decline of these towns, then the tariffs should not matter. The tariffs only matter if they drive up the cost of steal. If it is the case that US steel manufacturers were not being undercut by foreign competition but just got smaller because of better technology, then the tariffs will not raise the price of steal. In that case, US manufacturers are just as competitive and will continue to sell steel to meet the domestic market. And the competition among them will drive the price down to its natural level.

    Tariffs only drive the cost up of a product if the price of imported products is less than the domestic products. Then, the tariff drives the price up to whatever the higher cost of domestic product dictates. If that is the case, then it wasn't technology but trade that killed the domestic market. If that is not the case, then the tariffs won't result in the price of the commodity going up.

  • livelikearefugee||

    Prices have already gone up. Fabricators and steel producers raised prices as soon as they felt confident that the market was spooked by talk of tariffs. Same thing happened in the lumber industry with the tariffs on Canadian commodity grade lumber.

    Markets anticipate scarcity.

  • John||

    This is a perfect example of a reason author understanding the arguments for his own position. If you want to object to tariffs, fine. But do so because they prevent the country from taking advantage of cheaper foreign imports and force it to buy domestic products that in a free market would not be competitive or exist. But don't lie and pretend that the tariffs raise the price of things but somehow international competition is not what is hurting the domestic industry. It has to be one or the other. it can't be both.

  • gormadoc||

    Obviously competition drives down the profits of those competing from what they otherwise would be.

    But that's not what Reason is talking about here. The focus is on jobs. Tariffs aren't bringing back many jobs because the steelworkers are competing against automation, not so much foreign workers. Trump sold the Rust Belt his lines on bringing back their jobs and revitalizing their communities but that's not what is happening or what will happen.

  • John||

    If that is the case, then the price of steal will not go up. If the only reason domestic steel employment has gone down is because of automation, then putting tariffs on foreign products will not raise the price of steel. All that will happen is production will shift to the US but since US makers are competitive, the price won't change. Yes, the automation means fewer jobs are created than say 20 years ago, but the domestic industry still benefits and the price does not go up.

    The only way the price goes up is if the foreign steal is cheaper than the domestic steel. And that indeed is what Reason is claiming here. If that is the case, then the domestic industry is going away because it can't compete with foreign competition. And in that case, trade most certainly is the result of the loss of employment not automation. Reason is trying to have it both ways claiming that the reduction in US steal employment is the result of automation but then also claiming that forcing people to buy US steel raises the price of steel. Both of those things cannot be true. The reason tariffs are bad is because they prevent the US from taking advantage of lower cost overseas producers. And if that is the case, then the domestic industry is dying because of trade not automation.

    The author of this piece just doesn't understand the issue and is spouting talking points with no regard to their consistency or truth.

  • sarcasmic||

    Why can't it be both? Not everyone is going to buy foreign steel just because it is less expensive. They may want to Buy Mrkn or they might not trust the quality of imported metal. There's a lot of reasons why people choose more domestic goods over cheaper imports.

  • sarcasmic||

    more *expensive*

  • gormadoc||

    It can be both factors at the same time affecting employment, but employment changes have mostly been due to automation and process changes.

    Being competitive does not mean that your prices will be exactly like a competitor's. Whole Foods and Walmart are both competitive in grocery shopping but their prices are very different. If you forced Walmart to charge prices more similar to what Whole Foods does now Whole Foods would raise their prices.

    "the reduction in US steal employment is the result of automation but then also claiming that forcing people to buy US steel raises the price of steel. Both of those things cannot be true"
    Both can easily be true. Automation makes Walmart's grocery system competitive and cheap. This automation has spread in reduced manners to other grocery chains. If you then force people to buy Whole Foods the price then increases.

    If you force people to buy anything common the price will increase. You substantially increase demand without any necessary change in supply. Consider insurance or public education.

  • John||

    It can be both factors at the same time affecting employment, but employment changes have mostly been due to automation and process changes.

    If the changes have mostly been due to automation, then the loss of employment has mostly been due to automation not cheap foreign competition. Yes, they both can be true. But to the extent that it is because of automation, the less the price of steel is going to go up.

    Reason is claiming that jobs are not going to go up because of automation. Yet, they are also claiming prices are going to skyrocket. If prices are going up, it is because the US producers are not competitive. That means the job losses were due to trade. It is really that simple.

    Are you capable of questioning anything reason writes? Is it kind of like a holy text to you that you must believe no matter what?

  • sarcasmic||

    Reason is claiming that jobs are not going to go up because of automation. Yet, they are also claiming prices are going to skyrocket.
    .
    .
    .
    Are you capable of questioning anything reason writes?

    Nobody said prices would skyrocket. They said that prices will go up, because that's what happens when you slap tariffs on stuff for the purpose of making it more expensive. Duh. They also said that if there were any new jobs, that they wouldn't be enough to save towns being that most of the process is automated. They also said that the higher priced metal would cause job losses down the line, which is something the vast majority of economists are saying.

    So if you're going to accuse Reason of misrepresenting the truth, the least you could do is not lie about what they say.

  • Headache||

    Did you notice Reason said the price of domestic steel increased. That is not the cause of tariffs on imported steel. Domestic prices rose due to new labor contracts with steel worker unions and the increased price of fuel to move raw materials and finished steel. I haven't checked lately ( because I don't care ) but the last time I did, downstream users could still purchase imported ( with tariffs ) steel for less than domestic steel. What caused higher price in world market was Obama fucking with U.S. coal production. But Reason can't bring themselves to be critical of Dear Leader. (Socialist Scum)

  • gormadoc||

    "If prices are going up, it is because the US producers are not competitive. That means the job losses were due to trade. It is really that simple."
    That's completely wrong. Raising the price floor will increase prices of things that were above that price. The lowest quality goods will drop out entirely, decreasing overall supply. The higher priced items now see higher demand and will adjust their prices even higher. That's basic economics. Competitive does not mean "priced exactly the same."

    Your second point doesn't even follow the first. I don't see how you think it does. There's no way that the US steel industry would lose 75% of their jobs due to foreign trade without a comparable reduction in their production.

  • livelikearefugee||

    Both things are true because US steel producers raised their prices knowing buyers would increase purchases in anticipation of the tariffs. They have not added workers because the last variable that any manufacturer wants to increase is personnel costs.

    Apparently, brilliant economists like Peter Navarro and the Dotard don't realize that the elasticity of demand for steel and the elasticity demand for union labor are very different.

  • ThomasD||

    Competition does not necessarily drive down profits, nor does it necessarily drive down price. Competition can easily lead to alternative outcomes if it results in increased demand for whatever is being produced, or creates a scarcity of supply.

    Even if there is a revitalization of the steel industry that would most likely not bring back Youngstown, at least not on the scale it once was. Steel production has changed since the days of the open hearth furnace, and has been greatly decentralized. There simply is no need or justification for a Youngstown, Buffalo, or Pittsburgh anymore.

  • ThomasD||

    Changing something about the steel industry, then looking in those places for big changes, is like pissing in your gutter, then testing the nearest river for a change in pH.

  • Unicorn Abattoir||

    It is fundamentally cruel to lie to people and say 'by government policy, we're going to make your communities stable again.

    It's almost like he's against socialism, or something.

  • Just Say'n||

    I love these "into the midst of no man's land" articles. I want Robbie to do these articles, just so there can be a picture of his perfectly maintained hair standing beside a grizzled factory worker giving him the side eye.

    "What do you mean you can't change a tire?"

  • Unicorn Abattoir||

    Robby just runs his fingers through his blond locks and the tire changes itself.

  • Don't look at me.||

    WE DIDN'T GET IMMEDIATE RESULTS! FAIL!

  • ThomasD||

    Yep. Articles like this do nothing to advance the arguments in either direction. It's sad, lazy hackery.

    If anything this sort of obvious unrealism tends to discredit the author.

  • Rev. Arthur L. Kirkland||

    Some voters believed that Pres. Trump would rework economic fundamentals to enable poorly educated, backward people lacking marketable skills and residing in lame communities to prosper. And not only to prosper, but to do so at the expense of educated, skilled, accomplished residents of successful, modern communities.

    Perhaps people that dumb get precisely that which they deserve.

    (We should provide lifelines to enable their children -- the smart, ambitious ones, anyway -- to escape the shambling towns, enabling them to move to good campuses and strong communities to pursue education, opportunity, and a better life.

    The adults? Let them eat their Trump hats.)

  • Red Rocks White Privilege||

    Remember when Boomer shitlibs were up in arms about the towns of the Rust Belt being decimated by changing economics and wanted to make sure they stayed intact and functioning?

    Pepperidge Farm remembers.

  • Rev. Arthur L. Kirkland||

    Some people wished to help the shambling towns and people hurt by bright flight. The recent hard turn toward backwardness, intolerance, and ignorance among the relevant population has diminished others' generosity and sympathy.

  • Don't look at me.||

    "successful, modern communities."
    Name some.

  • Rev. Arthur L. Kirkland||

    I encourage dullards to perform their own basic research. It provides opportunity for self-improvement.

  • Inigo Montoya||

    No doubt your own parish or ministry or whatever you call your church is located in one of those "successful, modern communities" you so admire. You ought to realize, padre, that most Libertarians are not really pro-Trump, so your incessant jibes are mostly poorly targeted.

    In your favor, however, you are helping to reinforce my own dim view of organized religion. From your comments, you seem to fit the mold of judgmental, narrow-minded, and dogmatic thinking I've come to expect from your profession.

  • Rev. Arthur L. Kirkland||

    I would guess most libertarians loathe an authoritarian blowhard such as Pres. Trump.

    Most of the commenters at reason.com are right-wingers who have little to do with libertarianism, however, so the comments tend toward TrumpLove (and the bashing of anything tolerant, liberal, moderate, or non-conservative libertarian). My jibes are properly aimed.

    Organized religion is beneath the respect of every ostensible adult. I am associated with the Congregation For Exalted Reason, the adult choice for spirituality. Choose reason. Every time.

  • Neomorph||

    Big city steel hasn't done well for almost 20 years. US steel, AK steel, Republic. Look at SDI, Nucor or other non-union shops. Different story.
    This is a poorly researched article.

  • RockLibertyWarrior||

    "Tariffs Aren't Saving Steel Towns And it's cruel to tell people that government policy can reverse the decline." Reason likes to repeat this bullshit on constant basis and its not true. Now I am not defending tariffs, but what I am doing is calling out "Reason" and Nick for repeating a liberal lie that manufacturing "isn't coming back and there is nothing you can do about it." Its as if "Reason" is so urban they like attacking middle America like the loony leftards on both coasts. Manufacturing in this country has been overtaxed, and over regulated not to mention NAFTA wasn't "free trade" like "Reason" likes to vomit it up every so often, its managed trade where only the highest bidders get to trade, not only that, NAFTA added 100's of pages of regulations to the already burdensome ones we already have. The government is what has destroyed steel towns, not technology, not "progress", the government, which is what "Reason" is supposed to hate.

  • lbyron||

    Your picture of an old steel factory in the US is what you are attempting to renew and revive. Until Trump, new investment for production improvement was amortized over 20 years. That's a lifetime in the steel industry. I live in Korea, and I've been to the Pohang Steel mills (POSCO). They are modern, clean, shiny, automated, environmentally friendly. The news today is that POSCO plans to retool that factory this year to incorporate not just more robots but AI. We have buildings from 60 years ago that are literally rusted out because of the archaic tax laws. We are playing catch up, steel is an industry vital to national security and Reason's unReasonable commitment to obstructing the attempt to stimulate and protect this industry in America is irrational. Don't make perfect (free trade policy) the enemy of good (pragmatic trade policy).

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