Economy & Business

Steel Tariffs Do Not Advance National Security

Workers check steel bars at a factory of Dongbei Special Steel Group Co., Ltd. in Dalian, China. (Stringer/Reuters)
The false pretenses of Trump’s latest protectionist move

The worst ideas are bipartisan. Last week, former New Mexico governor Bill Richardson wrote an op-ed urging the Trump administration to pursue protectionism for the steel industry and praising the president for his eagerness to do so. Meanwhile, the Commerce Department officially unveiled a plan to impose tariffs of at least 24 percent on steel and 7.7 percent on aluminum, subject to the president’s will. It’s worth noting that the U.S. already has steel duties of up to 266 percent, which these will be in addition to.

Unsurprisingly, the administration’s plan was cheered by the likes of Chuck Schumer, who called the move “the beginning of efforts by this administration to finally get tough on China.” Republicans were more circumspect about the plan, with Lamar Alexander calling attention to the Bush steel tariffs’ havoc upon the American manufacturing industry. American manufacturers already face steel prices of nearly twice the world export market price owing to taxes and restrictions. Where steel mills add $36 billion of value to the economy, manufacturers that use steel add “over $1 trillion — or 5.8% of GDP” and employ over 6 million people, notes Cato’s Dan Pearson. Naked protectionism for one industry will have a devastating effect on others that employ 46 times as many people.

It’s important to remind ourselves here of what a tariff actually is: It is a tax. Trump boasts of being a “jobs president” and of passing “the biggest tax cut” in American history (he did not), yet the Trump administration has already imposed solar-panel and washing-machine taxes this year. These taxes have already started to derail American manufacturing jobs, and steel taxes will be even worse. Metal is a baseline material in manufacturing across the board; in effect, this makes it a forced price increase on most manufactured goods, with the government pocketing the rise. Before these new taxes, steel prices were already at a seven-year high.

Even the government may be losing out on the deal. The further increase in steel prices will mean higher prices for goods and lower demand for them. As lowered demand takes its toll on manufacturers, they will shrink and import less steel, yielding a reduction in revenue from business taxation and tariffs alike. And that is not to mention the increased cost of living and job losses that would go with it.

All of these effects are well-established. In 1915, Hilaire Belloc quipped that “at Oxford and at Cambridge, the few who profess to have some knowledge of political economy have shown themselves unable to this day to grasp any of the arguments for Protection.” His 1904 essay on the protectionist movement, which speaks of the futility of trying to “restore the conditions of thirty years ago” via tariff, is eerily familiar.

American conservatives have ideologically (if not always in practice) favored free trade for the better part of a century now.

Indeed, in the 1810s, Thomas Jefferson and John Adams took the benefits of international trade and free markets as a given. It is true that a Hamiltonian disdain for free markets has recurred in American politics over the years, but American conservatives have ideologically (if not always in practice) favored free trade for the better part of a century now.

On a disturbing note, like many bad ideas, this one is being pursued under the purview of national security, by means of a 1962 statute, the Trade Expansion Act. It not only cheapens the term “security” to use it as frivolous justification for protectionism, but the statute also gives the president, rather than Congress, the ability to act however he wishes in this area of the economy. Pennsylvania’s Pat Toomey, who supports some degree of trade-policy retaliation, argued recently that “invoking national security, when I think it’s really hard to make that case, invites retaliation that will be problematic for us.”

The move has sparked backlash from governments and businessmen across the world, including many American allies. The president of South Korea, Moon Jae-in, threatens to complain to the World Trade Commission if the Trump administration imposes steel protectionism, and he has suggested expanding exports to Russia and Southeast Asia given the uncertainty of the U.S. market. Earlier this week the news emerged that the European Union is ready to respond to the Trump plan with tariffs on American products. It ought to embarrass Republicans that a GOP administration is proving less friendly to international trade than are some formerly Communist states.

The chairman of Japan’s Iron and Steel Federation put it best: “The recommendations violate the principles of free trade, which are the foundation for development and prosperity of the global economy.” This used to be something that conservatives believed in.

Jibran Khan is the Thomas L. Rhodes Journalism Fellow at the National Review Institute.

Most Popular


How to Bend the News

This, from ABC, is a nice example of a news organization deliberately bending the truth in order to advance a narrative that it wishes were true but is not: Venerable gun manufacturer Colt says it will stop producing the AR-15, among other rifles, for the consumer market in the wake of many recent mass ... Read More

Trump’s Total Culture War

 Donald Trump is waging a nonstop, all-encompassing war against progressive culture, in magnitude analogous to what 19th-century Germans once called a Kulturkampf. As a result, not even former president George W. Bush has incurred the degree of hatred from the left that is now directed at Trump. For most of ... Read More

George Packer Gets Mugged by Reality

Few journalists are as respected by, and respectable to, liberals as The Atlantic’s George Packer. The author of The Assassin's Gate (2005), The Unwinding (2013), and a recently published biography of Richard Holbrooke, Our Man, Packer has written for bastions of liberal thought from the New York Times Magazine ... Read More

Iran’s Act of War

Last weekend’s drone raid on the Saudi oil fields, along with the Israeli elections, opens a new chapter in Middle Eastern relations. Whether the attack on Saudi oil production, which has temporarily stopped more than half of it, was launched by Iranian-sponsored Yemeni Houthis or by the Iranians themselves is ... Read More