This gem showed up in my inbox this morning: “President Trump’s Predecessors Learned about Steel Tariffs the Hard Way” by Mark Perry.
“the Peterson Institute for International Economics found that tariffs on specialty steel in the 1980s resulted in annual consumers losses of $1 million for every US steel job saved ($2.26 million in today’s dollars). Not.A.Good.Trade-Off.”
Had Bush caused taxpayers to give $500,000 a year to each steel worker whose job was was jeopardized by cheap foreign specialty steel being “dumped” on America, those workers, and all Americans who buy things made of steel (read, “everyone”), would be wealthier today.
Especially hard it by those tariffs were all those workers in these industries:
- Manufacturers and retailers of goods that contained steel whose prices had to be higher than necessary because the tariffs increase the cost of its materials;
- Manufacturers and retailers of non-steel goods or services that would have had higher sales because their customers would have had extra money because the stuff they purchased that contained steel was cheaper due to foreign steel;
- Importers, shippers, and loading dock operators;
- Bankers that specialized in international credit; and
- Farmers and other exporters whose exports will be lessened by retaliatory import tariffs by foreign governments.
The number of workers that were negatively affected by the higher than necessary steel prices was far greater than the the number of workers employed in the steel industry. And, of course, Americans paid more than necessary for the goods they purchased. As reflected in the study quoted above, the sum of these negatives were 2.6 times as large as the benefits to steel workers.
As mentioned in the prior post, perhaps more significant is the number of people who would have filled jobs that were not created in America because of the tariffs. For example, consider the people who would have been employed at manufacturing plants that would have been built in America had the steel tariffs not made it economically advantageous to build those plants in countries that did not impose tariffs on steel.
Trump’s tariffs may be good for Trump (politically or otherwise) and U.S. steel and aluminum manufacturers, but they are really bad for everyone else, especially American workers.*
* For a discussion of why fewer American jobs causes wages to be lower see: “Tax Cuts and Employee Compensation.”