Trump's Steel Tariff Echoes Of The Past
From Richard Nixon on steel tariffs have been tried and found wanting. They just don’t work, steel companies use them to lift prices, not investment and pay higher dividends to shareholders.
George W. Bush, Bill Clinton and Ronald Reagan also imposed tariffs on steel imports, to little effect. Jobs have continued to be lost, steel plants closed as steel companies look for cost savings, a mode of thinking shared among steel users in the wider economy.
That in turn adds to costs for manufacturers, especially in cars, white goods and construction, they add to inflation and they end up costing jobs as end users are forced to cut costs and jobs.
America imports four times as much steel as it exports, and imports are on the rise again thanks to the gathering pace of the American economic recovery which is now 9 years old.
Years of rising demand from car companies, white goods makers, construction and housing companies and a host of smaller users saw demand for steel spillover into the import markets.
News from Ford and GM Thursday that February car sales sank 6.9% won’t be the last bit of weak or bad news we hear from the car companies as they face another year of weak to falling sales (car sales fell 2% in 2017 after years of gains).
In many cases US steel makers have refused to invest, preferring to make profits and return cash to shareholders or private equity owners.
The US imports steel from more than 100 countries, three-quarters come from just eight countries, according to the World Trade Organisation.
The top supplier to the US last year was Canada, followed by Brazil, South Korea, Mexico and Russia. Other notables include Turkey, Japan, Taiwan and Germany.
China is just outside the list at No. 11 despite producing about half of the world’s steel. The US already has restrictions in place on Chinese steel. China moved to cut steel imports in 2017 via government directive, and stimulating domestic demand and ordering surplus steel making capacity to shut.
Trump’s move (supported by ideologues inside the White House) was done ostensibly to protect American jobs in steel making. Tariffs don’t. In fact the decline in American steel jobs has been going on a long time despite frequent interventions by Washington.
The industry now directly employs about 140,000 workers, according to US Bureau of Labor Statistics data. Half a century around 650,000 people were employed in the industry.
A stream of technological advances have spawned huge increases in productivity, allowing steelmakers to do more with fewer workers. Electric arc furnaces have emerged, higher use of scrap steel (which need fewer workers), more energy efficient blast furnaces and other equipment, computerisation and better processing technology (and the rising use of robots) have eroded jobs across the sector.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.