American Steel Tariffs OPENING CASE year after the tariffs were imposed, while imports fell In March 2018, President Trump imposed a 25 percent around 10 percent. The prices of U.S. steel products tariff on imports of foreign steel into the United States (and increased by around 20 percent in 2018 and profits for a 10 percent tariff on aluminum imports). In justifying the U.S. steel producers improved. Flush with cash, there steel tariff, Trump argued that a strong domestic steel in- have been several announcements regarding planned dustry was necessary for the national security of the United expansions in capacity from domestic steel producers, States. In 2017, some 36 million tons of steel were im- including Nucor, Steel Dynamics Inc., and U.S. Steel Corp. ported into the U.S., while 81.6 million tons were produced These plans would add about 8.3 million tons of produc- domestically. Import penetration into the U.S. had increased tion to the U.S. steel industry, increasing its capacity by from about 23 percent of total steel consumption in 2007 14 percent. to 31 percent in 2017. The U.S. exports about 2 million tons On the other hand, some steel consumers have pushed of steel per year. There were roughly 140,000 people back, pointing out that higher steel prices are hurting their employed in the U.S. steel industry in 2018, and around businesses. General Motors, a major steel consumer, 6.5 million employed in industries that consumed steel, announced in November 2018 that Trump's tariffs on steel including construction, machinery, and automobiles. (and aluminum) would cost it over $1 billion a year. The This was not the first time the U.S. steel industry had company announced plans to shut several plants and been the beneficiary of import tariffs. The industry has a eliminate 15,000 jobs (although higher steel prices were long history of tariff protection. Some critics complain that not the only factor here). Similarly, the iconic American this is linked to the importance of steel producing states motorcycle manufacturer Harley Davidson announced that such as Indiana, Pennsylvania, and Ohio in U.S. Presidential its 2018 profits were wiped out by higher metal costs due elections. In 2002, the Bush administration placed tariffs to Trump's tariffs. The company has announced plans to ranging from 8 percent to 30 percent on imports of foreign move some production overseas as a way of avoiding the steel. The U.S. exempted its NAFTA partners Canada and high costs of metals in the United States and supporting Mexico from these tariffs. The Bush tariffs were lifted nine foreign sales. Only time will tell if the announcements from months later after significant opposition from businesses in GM and Harley Davidson are indicative of the impact that steel consuming industries, who claimed that higher steel higher steel prices will have on many American busi- prices were resulting in significant job losses. In 2016, the nesses. If these are the first salvo, Trump's steel tariffs may Obama administration imposed punitive tariffs as high as ultimately be judged to be no more successful than those 500 percent on imports of some steel products from imposed by George Bush in 2002. Analysis of the Bush China, arguing that Chinese producers were dumping tariffs suggested that the gains to steel producers were excess steel production in the United States at below the outweighed by the losses to U.S. steel consumers. costs of production. Due to the Obama tariffs (which remain in place), by the time of Trump's announcement, China Sources: Bob Tita and Alistair MacDonald, "Foreign Steel Keeps Flowing into the U.S. despite Tariffs," The Wall Street Journal, accounted for only 2 percent of U.S. steel imports. The December 5, 2018; International Trade Administration, Steel Imports largest steel exporters to the U.S. in 2017 were Canada, Report: United States, June 2018; Alistair MacDonald, "Tariffs Roil South Korea, Mexico, and Brazil. Global Steel Trade, Creating Winners and Losers," The Wall Street The Trump administration argued that this round of Journal, November 29, 2018; Doug Mataconis, "After Trump's Tariffs, steel tariffs would help revitalize the struggling U.S. steel American Steel Industry Faces Downturn," Outside the Beltway, January 19, 2019; Ruth Simon, "A Tale of Two Steel Firms and Their industry. Critics countered that the result would be higher Diverging Paths Under Trump's Tariffs," The Wall Street Journal, prices for steel consumers and job losses in those indus- February 10, 2019; "Tariffs on Steel and Aluminum are Creating Some tries. The early evidence is mixed. Domestic steel produc- Winners," The Economist, August 9, 2018; G. C. Hufbauer and B. tion in the U.S. increased by around 7 percent in the first Goodrich, "Steel Policy: The Good, the Bad, and the Ugly," Peterson Institute: International Economics Policy Briefs, January 2003