Near the top of an official “fact sheet” distributed by the White House on Tuesday morning, the Trump administration makes clear its rationale for imposing new tariffs on steel and aluminum imports.
The White House claims that “foreign nations have been flooding the United States market with cheap steel and aluminum” and promises that taxes on those imports will restore “fairness” to the markets for steel and aluminum.
That’s about as straightforward as it could be: The Trump administration believes cheap imports are a problem and is seeking to artificially raise prices with tariffs.
Is that fair? Steelmakers and aluminum manufacturers might think so, but the potential costs will spread through dozens of downstream industries and could impact the price of goods ranging from beer cans and cars to kitchen gadgets and construction vehicles. Nucor, one of America’s largest steelmaking companies, said it would raise prices just hours after the tariffs were announced.
Jeff Luse reports that “Trump’s tariffs on steel and aluminum are bad news for American energy.” A slice:
Imposing levies on steel and aluminum will increase costs for domestic energy projects (which will be passed on to consumers) while hamstringing America’s energy dominance. In recent years, high material costs (and burdensome regulations) have led to cancellations or price tag hikes for offshore wind energy, advanced nuclear power, and transmission line projects. Instead of building oil pipelines to the U.S., these trade barriers could also incentivize Canadian energy companies to invest in other markets, such as Japan, says Wayne Winegarden, an economist at the Pacific Research Institute, a free market think tank. “This really is one of the dumbest things we could be doing,” Winegarden tells Reason.
Importantly, these tariffs won’t accomplish Trump’s stated goal of “making America rich again.”
A study from the International Trade Commission found tariffs on steel (25 percent) and aluminum (10 percent) implemented during the first Trump administration decreased production and increased costs in downstream industries that use these materials by 0.6 percent and 0.2 percent, respectively. Total production in downstream industries was $3.5 billion less in 2021 because of these tariffs.
It’s wise to always heed Douglas Irwin on matters related to trade:
The U.S. does depend on some foreign steel. “The import market share was about 25%,” said Douglas Irwin, a professor of economics at Dartmouth College. He said most of it comes from political allies like Canada, Germany, Japan and South Korea, “who were not going to cut us off from steel if there was a national emergency.”
Speaking of Doug Irwin, he was a guest recently on Jon Hartley’s excellent podcast.
One month is no cause for great alarm, but it does suggest that Mr. Trump’s policies are causing some hesitation among small-business employers. They’re worried about finding workers amid the crackdown on immigration, and that prices are still rising. They may also be worried about Mr. Trump’s willy-nilly tariffs and their impact on supply chains and the overall economy.
Uncertainty is typically a Democratic malady, as regulation and higher taxes hang over business decisions. Mr. Trump needs more business confidence, not more uncertainty.
GMU Econ alum Benjamin Powell calls for more high-skilled immigrants. A slice:
If he follows through on his new pro-high-skilled immigration rhetoric, it would be a major boost for the U.S. economy. Musk is correct to claim that U.S. companies that import foreign engineers improve their companies in the same way that NBA teams do when they import foreign athletes like Serbian-born MVP Nikola Jokic. But unlike in the NBA, with a fixed 82 games to win or lose, our economy is not zero-sum. Importing engineers makes companies more productive and spurs competition that enlarges the overall economy.
High-skilled immigrants don’t just bring talent to fuel productivity in existing companies. They also found companies that employ and serve the needs of millions of Americans. Musk himself once held an H-1B visa, and he is not alone. Forty-five percent of Fortune 500 companies were founded by immigrants or children of immigrants. If a country had the combined output of these companies, it would have the third highest GDP in the world. Immigrants also found small and midsized companies at a high rate. Approximately 3.2 million immigrants, roughly 15 percent of the foreign-born population in the United States, run their own businesses.
Jon Miltimore offers some sound economics about Super Bowl half-time performers.
