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Beijing: Making America Great!

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Here’s a letter to the Wall Street Journal:

Editor:

Steel-industry lobbyist Thomas Gibson’s brief for Trump’s steel tariffs completely misses many marks (Letters [2], Feb. 7). Here are two.

First, no one has ever denied that U.S. steel output and the profitability of U.S. steel producers rise whenever Uncle Sam punitively taxes Americans who buy foreign-made steel. So Mr. Gibson is mistaken to declare that the rise in 2018 of steel output and steel-industry profits is evidence against the validity of arguments, such as yours, in protest of Trump’s tariffs.

Second, Mr. Gibson asserts that there exists a “global steel-overcapacity crisis.” Such assertions are easy to issue; indeed, they’ve long been part of what is now a tired protectionist script. Yet insofar as “steel-overcapacity” has any economic meaning at all, it is capacity that governments create by transferring taxpayer funds to steel producers. But this overcapacity is excessive only from the perspective of the unfortunate taxpayers forced to fund it. It is a boon to those who buy steel – including to us Americans who thereby gain access to lower-priced steel paid for in part by the Chinese people.

We are helped, not harmed, by such foreign subsidies. As Paul Krugman – whose Nobel Prize was for his work in trade theory – wrote, “all that matters for the gains from trade are the prices at which you trade – it makes absolutely no difference what forces lie behind those prices.”*

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

* Paul Krugman, “What Should Trade Negotiators Negotiate About? [3]Journal of Economic Literature, March 1997, page 115.

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