Donald Trump announced Monday that the US will impose a 25% tariff on all steel and aluminum imports.
The president is in the habit of declaring fundamental changes in trade policies, and only roams around them quickly. Last week, Trump postponed a long-standing 25% tariff on all imports from Mexico and Canada after reaching an agreement with both countries on border security.
But there is reason to believe that Trump's steel and aluminum tariffs are sticking. He implemented almost identical policies during his first term.
In 2018, Trump imposed a 25% tariff on imported steel and a 10% tariff on imported aluminum, exempting only a few countries. About a year later, Trump granted an extended exemption to American top steel providers, two steel providers, Canada and Mexico.
His first attempt had terrible results, so Trump's commitment to rerun his experiments with large steel and aluminum tariffs is curious.
Needless to say, tariffs harm domestic consumers. Taxing imports tends to make them even more expensive. Sophisticated proponents of tariffs tend to acknowledge this, but argue that the harm to consumers outweighs the benefits of policies towards domestic manufacturing and/or national security.
This may apply to certain customs duties. However, the data suggests that Trump's steel and aluminum obligations have harmed American consumers and manufacturers alike, but does not provide clear national security benefits.
According to one estimate from the Peterson Institute for International Economics, Trump's metal tariffs lifted by the Biden administration were on track to sacrifice US consumers and businesses about $11.5 billion a year . It is not entirely clear that this large sum has acquired a significant number of steel jobs in the United States. Between January 2018 and October 2022, employment in the US steel sector actually fell 4.2%.
If tariffs weren't in place, steel unemployment could have been even higher. The Alliance for American Manufacturing is a group that supported tariffs – claiming in 2019 it saved or created about 12,700 jobs. Still, taking that number (and Peterson's cost estimate) as the gospel, Americans may have paid about $900,000 for each steel job.
But the bigger problem with metal tariffs is that much more American companies are manufacturing things, however. Out It's more steel than producing the steel itself. According to one estimate, the number of Americans working in the steel use industry outweighs those working in steel production by an 80-1 margin. For steel users, all of Trump's metal tariffs were harmful and profitable. According to a Federal Reserve survey, Trump's policies have not benefited by reducing US manufacturing employment and encouraging retaliatory tariffs on US goods. This study means that Trump's steel and aluminum tariffs will spend around 75,000 manufacturing jobs on the United States.
All of this provided little identifiable benefits to national security. Steel is an important input in military hardware, and it is true that China (the enemy of the US) produces more steel than we do. However, the US imports about 80% of its steel from its allies. And maintaining the goodwill of such allies is perhaps more important (and realistic) than trying to replicate the collective production capacity of Canada, South Korea, Brazil, Mexico and the European Union domestically.
In short, if Trump is serious about his metal tariffs, and he certainly appears to be – Americans must train themselves for rising prices and falling manufacturing jobs. Not there.
