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Actually, a Zombie Apocalypse is MORE Likely

Here’s a letter to a new Cafe Hayek reader:

Mr. Rick Gonzales

Mr. Gonzales:

Thanks for your e-mail.  You support Pres. Trump’s steel tariffs because, you believe, “they’ll help at protecting us from Chinese predatory pricing.”

As you likely know, predatory pricing allegedly occurs when a supplier, hoping to gain a monopoly position tomorrow, tries to destroy all of its competitors by charging ‘excessively’ low prices today.  Forget for purposes of this letter that neither history nor theory is kind to allegations of predatory pricing: the conditions necessary to make it a plausible strategy are wildly unrealistic.  (You can check out some of my thoughts on this matter here.)

You might reply that, if Beijing is subsidizing Chinese steelmakers, such predation becomes more likely to succeed.  To which I respond: ‘Yes.  It raises prospects of success from about 0.0000000000000001% to about 0.0000000000000002%.’  U.S. steelmakers currently supply about 70 percent of all steel-mill products bought in the United States, with the remaining 30 percent coming from foreign-based companies. (The proposed tariffs are on steel-mill products only – ‘raw’ steel, if you will.)  The top ten countries that supply such steel today to the U.S. are, in this order: Canada, Brazil, South Korea, Mexico, Russia, Turkey, Japan, Taiwan, Germany, and India.  The steel supplied to us by the many different companies in these ten countries, combined with the steel that we supply to ourselves, is about 93 percent of all steel-mill products bought and consumed in the U.S.

Among today’s foreign-country suppliers of steel-mill products to the U.S., China ranks #11, supplying about 2 percent of U.S. imports of such steel – or about 0.6 percent of all such steel bought and used today in the U.S.  Even compared only to the amount of such steel supplied to the U.S. market by American companies, Chinese steelmakers supply a paltry 0.4 percent of what American companies supply to the U.S. market.  That is, American steelmakers alone supply 250 times more steel to the U.S. market than do the Chinese.

Remember that to monopolize the American market, not only would the Chinese have to bankrupt all U.S. steel producers, they would have to bankrupt all steel producers worldwide.  This reality and these numbers render fears of a Chinese scheme to monopolize the U.S. market for steel-mill products about as plausible as fears of a zombie apocalypse.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030