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Veronique Vanquishes Trump

My intrepid Mercatus Center colleague Veronique de Rugy, writing in the New York Times, exposes many of the fallacies fueling support for Trump’s tariffs on steel and aluminum.  Some slices:

On the campaign trail, Candidate Trump promised to drain the swamp in Washington. Last Thursday, the swamp showed how powerful it really is. In a sort of crony-capitalist reality TV broadcast, President Trump, flanked by steel and aluminum executives, granted their requests for tariffs.

The announcement itself — which outlined a plan for 25 percent tariffs on steel and 10 percent on aluminum — was no surprise. Last summer, consistent with his longstanding hostility to free trade and globalization, the president exclaimed, “Tariffs, I want tariffs.”

Mr. Trump, in the White House, summoned steel and aluminum tycoons for a “listening session.” It wasn’t the first time some of America’s top executives came hat in hand to Washington in search of privileges

But it may have been the first time we got to watch live as an American president announced to the world that he would gladly help handicap our domestic producers’ foreign rivals — by taxing the Americans who buy steel and aluminum imports


Like President Bush [who imposed ill-advised steel tariffs in 2002], Mr. Trump will raise the cost of doing business in steel- and aluminum-consuming companies. In turn, it will make life much harder for the 6.5 million workers those industries employ. Many will lose their jobs — possibly more than the 170,000 workers currently employed in the steel and aluminum producing industries.

Adding insult to injury, the president is comfortable with the knowledge that his import tax will make our cars, infrastructure, soda cans and aircraft more expensive. And he’s flat-out wrong when he claims, “Maybe it’ll cost a little bit more, but we’ll have jobs.” As the Department of Commerce’s own report shows, the decline of jobs in the steel and aluminum industries predates the competition with China by decades. Industry experts know that this is mostly because of innovation and industry consolidation. The era of labor-intensive metal production is over.

And Mr. Trump may think a tariff-induced trade war would reduce our trade deficits, as he gleefully tweeted the day after the announcement, but don’t count on it. In the unlikely event that the import tax would incentivize foreign companies to set up shop in the United States, these investments would very likely increase the United States trade deficit. It would prompt foreigners to buy fewer American exports in order to accumulate the dollars needed to fund these investments.