In the New York Post, Betsy McCaughey says the steel and aluminum tariffs have come under “an avalanche of false criticism.” Let’s check out her arguments one by one, in order.
National security I
Tariff-bashers claim in war, the United States could rely on foreign suppliers. That’s ridiculous. Uncle Sam can compel our manufacturers to make defense needs a priority — but not foreign producers. The biggest suppliers targeted by the tariffs are Brazil, South Korea, Russia and Turkey. Should our nation’s victory in war hinge on them?
Tariff-“bashers” don’t generally claim what she says they do; as her very next paragraph implicitly admits, they note that the U.S. can produce enough steel for our military needs. But she fails to take down even this strawman. Her last two sentences ignore the fact that Trump backed down from applying the tariffs to Canada and Mexico, the biggest and fourth-biggest foreign sources of steel. So even if we were down to foreign sources, we would have to be in a conflict in which Canada and Mexico, as well as Brazil, etc., were all unable or unwilling to let us buy their steel. (Most of these countries are treaty allies of ours.) This does not seem very likely — even if we get a national-security team as hawkish as some Trump critics fear — and if we were in such a conflict, steel would probably be the least of our worries.
National Security II
McCaughey: “Tariff opponents argue that US military needs for steel and aluminum amount to only 3 percent of domestic production. That’s now. But in a major military conflict, those needs would soar. In World War II, domestic steel producers had to boost production over 200 percent to meet military demands.”
Another way of looking at the same data is that we currently produce more steel than we did on the eve of the greatest mass-mobilization war in history. When Secretary of Defense Jim Mattis was asked to weigh in on the tariffs, he cautioned against global tariffs on steel, advised against any immediate action against aluminum imports, and expressed concern about the impact of rash action on our allies.
McCaughey again: “Critics claim tariffs will raise steel prices. That’s questionable. The opposite is more likely to happen, industry experts suggest. Tariffs will shift demand to domestic steel, enabling plants here to operate closer to capacity. That will bring down the unit price of American-made steel — not raise it. That’s Econ 101.”
So, uh, there are going to be two prices for steel products in the U.S.? One for products made here, and a higher one for imports? Nobody is going to engage in arbitrage to reset a price for the whole market? American steel companies are going to pass up the chance to raise profits by charging a higher price in response to foreigners’ having to charge a higher price? Econ 101 was a while ago for me, but I don’t recall any of it working this way. And there is already evidence that prices are spiking in anticipation of the tariffs.
Tariff-bashers also accuse Trump of abandoning “free trade.” Don’t believe it. US workers are being stung by sucker trade — not free trade. European countries hit US-made autos with a 10 percent tariff, four times higher than the tariff on European-made cars sold here.
At best this is an argument for action against European cars sold here. It’s not an argument for making it harder for U.S. workers in auto plants to get their supplies. And, by the way, Trump’s steel and aluminum tariffs are higher than other countries’ tariffs on American steel and aluminum. So McCaughey’s foreign counterparts can make the same bad case for doing their part to start a trade war.
“Don’t hold your breath for help from the World Trade Organization — a conclave of 164 nations, mostly poor and anti-American, empowered to impose binding trade rules. The US gets clobbered at the WTO, just as it does at the United Nations.”
Targets (and Prices)
“Trump’s Commerce Department proposes using tariffs to reduce imports, enabling domestic steel production to top 80 percent of capacity. Do the math. While imported steel will cost more, imports will drop from a third to a fifth of all steel used here. The lion’s share of steel used here will be made here, and prices will likely fall, as furnaces operate closer to full capacity.”
This argument substantially reprises one above while adding a touching faith in the government’s ability to make markets reach a politically determined goal. Other people have actually done the math, and determined that because of the exemptions of Canada and Mexico, “it would seem mathematically impossible that the tariff levels called for in the proclamations could achieve the protections of U.S. steel and aluminum that the Commerce report set out as goals.”
Back to Fair Trade
McCaughey concludes by noting that the U.S. has lower tariffs and non-tariff barriers to trade than most countries do, adding, “You wouldn’t know it, listening to the WTO.”
It’s true that we have lower tariffs than most countries. The principal source of evidence for that contention is, in fact, the WTO’s database. Our record on non-tariff barriers is less clear. One study found that between 1990 and 2013, the U.S. led the world in imposing non-tariff barriers, and not by a small margin.
Assume for the sake of argument, however, that McCaughey is right in suggesting that we have fewer trade barriers than most other countries. The point does nothing to disprove the major criticisms of the steel and aluminum tariffs: that they are not plausibly related to national security, that they will cost more jobs than they save, and that they risk a cycle of retaliation that will further impoverish Americans and foreigners alike. Nothing in her op-ed strikes so much as a glancing blow at any of those contentions.