The Seen Beneficiaries and Unseen Many Victims of Protectionism

by Don Boudreaux on April 23, 2018

in Crony Capitalism, Seen and Unseen, Trade

My Mercatus Center colleagues Veronique de Rugy and Christine McDaniel remind us of the many unseen victims of protectionism scarcityism.  A slice:

Look more closely, and you see these tariffs for what they are: import taxes that are raising costs for American manufacturers and households. These Americans, however, are largely invisible to policymakers in Washington. The well-connected and well-paid steel executives get to sit at the mahogany table with Trump, pleading for special privilege and protection, while a supermajority of everyday Americans get to watch on TV and shoulder the costs.

 We must recognize that the American manufacturers who need access to steel and aluminum products now face higher production costs and shrinking customer bases. All across the country, workers in these manufacturing firms now face shakier job prospects while they care for their families. Consumers of household appliances, automobiles and dozens of everyday goods made with steel and aluminum are also unwitting victims.

You are one of these consumers. So many of the things you buy (your car, fridge, phone) are made with these products, and they’ll cost you more, starting now.

The vast majority of American manufacturing firms are small- or medium-sized businesses with razor-thin margins. These businesses must now reprice their entire product lines and grapple with how much of the cost increase they can pass onto consumers before they start losing too much business. That’s what LOOK Trailers of Indiana is doing, as it struggles to absorb the 25 and 35 percent cost increases in steel and aluminum, two of the company’s key inputs of its manufacturing process. Companies are also looking into whether they must instead increase the share of steel-containing parts and components they outsource to stay profitable. That’s what Metalworking Group in Ohio is doing.

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