That Trump Threat To Slap A Tariff On Steel Would Kill Jobs

It’s no secret that President Donald Trump is highly skeptical of free trade. In fact, his incessant railing on pro-free trade deals like NAFTA and TPP was a major contributing factor in his 2016 presidential win.

But the feel-good notion of “fair trade,” or protectionism, to save American jobs is sadly unrealistic, at least overall.

Let’s look at President Trump’s threat to slap a “broad-based tariff” on steel imports to “level the playing field,” for example. While a tariff might save some jobs in the steel industry, comprised of about 150,000 American workers, it will not only hit the pocketbooks of American consumers, the price spike will cost many more jobs in steel-consuming industries, which are comprised of 16 times more workers than that of the steel industry.

“The greatest harm from broad-based steel tariffs would be to the thousands of American businesses and workers that use steel,” notes The Wall Street Journal. “These would include the higher cost of American steel for construction (42% of steel shipments), automotive (27%) and machinery (9%). Public works and homes would cost more to build.”

How do we know this? Real-life experience with the George W. Bush-era steel tariffs: “A study by economists Joseph Francois and Laura Baughman found that more American workers lost jobs (200,000) after George W. Bush imposed steel tariffs in 2002 than were employed in the entire steel industry at the time (187,500). The result was $4 billion in lost wages,” notes the Journal.

The downside of tariffs is not limited to the steel industry. Tariffs, while perhaps saving a small number of jobs in one industry, generally hurt Americans and kill jobs in other industries.

“The answer is not to erect higher barriers — in the long run, it’s not going to work, it makes us worse off,” said Clifford Winston, senior fellow at the Brookings Institution. Tariffs are “certainly not the answer to any employment losses.”

Even the oft-cited and strategically-placed tariffs imposed by Republican President Ronald Reagan arguably did more overall harm than good. When Reagan threw a 100% tariff on power tools, computers and televisions in 1987 as a way to pressure Japan to allow U.S. semiconductor producers to sell in their country, Americans ended up with goods nearly double the cost in result.

“Americans ended up paying a lot for that tariff,” reports CNN Money. “The average cost of memory chips more than doubled to $5.50 in early 1988 compared to $2.50 in 1986, according to a report by the Cato Institute.”

“It’s impossible to help all Americans through protectionism…this is the big fallacy behind it,” wrote Sheldon Richman, the author of the Cato report. “By helping one group you’re hurting another group.”

Moreover, as noted by Daily Wire’s Josh Yasmeh, “Technology, not trade, is the largest contributor to U.S. job loss in the manufacturing sector.”

Per The Financial Times, “The US did indeed lose about 5.6m manufacturing jobs between 2000 and 2010. But according to a study by the Center for Business and Economic Research at Ball State University, 85 per cent of these jobs losses are actually attributable to technological change — largely automation — rather than international trade. … The think-tank found that although there has been a steep decline in factory jobs, the manufacturing sector has become more productive and industrial output has been growing.”

Thus, American workers would be better served if government tackled the issue of fast-developing technology and focused on training workers for so-called New Collar jobs, as the Trump Administration currently is pursuing.

While there are legitimate arguments to be made for Trump’s game-theory regarding trade, or even a strategically-placed tariff, as some argue regarding President Reagan’s economic moves, it’s clear that the case against a tariff on steel imports is overwhelming.

“The motivation could only be to assist the politically clamorous owners of a handful of steel companies that would exploit government favoritism to raise prices,” notes the Journal. “The losers would be millions of the so-called forgotten men and women the President vowed to help during his campaign.”