Earlier this week, Commerce Secretary Wilbur Ross testified that the administration’s steel tariffs are not behind the sharp rise in steel prices. The problem is instead the profit motive, and he vowed to tackle it.
He said, “There’s no reason for tariffs to increase the price of steel by far more than the percentage of the tariff, and yet that’s what has been happening. That clearly is not a result of the tariff, that’s clearly a result of antisocial behavior by participants in the industry.” The government, he also said, will investigate whether firms are “illegitimately. . . profiteering.”
Contrary to Ross, it is entirely possible that the tariffs and the way they have been imposed have caused most of the price spike. If companies want to buy more steel because they fear that tariffs will rise further, for example, their added demand could raise prices in a way that adds to the tariffs’ direct effect. His theory, on the other hand, implies either that the tariffs just happened to coincide with something else that raised the profit-maximizing price for steel producers or that the firms had just been leaving money on the table through inattention before the tariffs. The tariff-centered explanation makes more sense.