Economy & Business

Repeal This Tax on Factory Jobs

A worker cuts a piece from a steel coil at the Novolipetsk Steel PAO steel mill in Farrell, Penn., March 9, 2018. (Aaron Josefczyk/Reuters)

In May, steel prices hit record highs — not only that, they exceeded the previous record high by about 50 percent, pushing up already-rising prices on everything from buildings to automobiles. That high price is paid by every American business that builds or manufactures — and by every American consumer, too.

It is time to get rid of the tariffs.

Tariffs on steel and aluminum were a nitwit policy in the Trump administration, and they are a nitwit policy in the Biden administration — if anything, nitwittier, given the inflation news.

A handful of politically connected American businesses gain substantially from the protectionist measures, but many, many more businesses suffer. There are many more U.S. businesses that use steel and aluminum — to manufacture everything from automobiles to airplanes to cans of beer — than there are businesses that sell steel. Many more workers and more wages are dependent on the steel-consuming businesses than the steel-producing ones. People who say they care about blue-collar factory jobs should be those calling loudest to repeal this tax on American manufacturing.

But where this matter is concerned, the Biden administration lacks judgment or courage — or both.

President Biden is in part a hostage to his own campaign mythology — the blue-collar guy from Scranton — and all the hokum that goes along with it. Steel jobs are a sensitive subject in Pennsylvania, where Biden lived for part of his childhood and which is central to his regular-guy narrative. Donald Trump liked to talk about China, but the tariffs also hit steel and aluminum coming from allies in the European Union, Canada, and elsewhere. The White House has promised to “review” the tariffs but is making no promises, and the United Steelworkers Union demands that they stay in place — and Biden is not much inclined to go his own way against the union bosses.

Naturally, the steelmakers themselves want to remain protected from competition from all those ruthless, race-to-the-bottom companies exploiting the defenseless low-wage workers of . . . uh, Germany.

Major manufacturing concerns such as machine-parts fabricators are in an impossible position: They can either absorb the higher prices themselves and thereby bleed profits and capital, or they can raise their prices and watch their customers go overseas to source their needs. Machine parts and industrial components are one of the biggest and most profitable export businesses in the country. But the artificially high price of steel eats into the other major U.S. exports, too, from aircraft to farm products to oil and gas.

One of the great stupidities of these tariffs, the foundational stupidity of them, is Washington’s inability to consider the fact that tariffs on steel and aluminum augment the profits of steelmakers and aluminum producers by taking income away from other American businesses. Tariffs don’t make the challenge go away — they just shift the costs to other American employers and other American workers.

The tariffs aren’t the only reason for high prices. Pent-up demand from the lockdowns, non-tariff trade disruptions, and other factors are in play. But when prices are at record highs and destructive inflation already is raising its head, it is bad policy to make the problem worse by making American manufacturers hostages to the short-term interests of a few politically influential companies and Democratic special-interest groups. These aren’t characters from a Bruce Springsteen song we’re talking about — these are companies in the S&P 500.

And we wish them well, but we would prefer not to tax every American factory on their behalf.

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