Pandora's Box: Another Look at Steel Tariffs

Even if one foolishly believes tariffs can be a good thing, Trump went well beyond any semblance of rational thinking.

The Peterson Institute for International Economics (PIIE) reports US Steel Is Already Highly Protected from Imports.

The US steel industry has been the largest beneficiary of special protection from imports for decades, with more than 60 percent of steel imports subject to tariffs at the end of 2017. The average share of all US imports from the world covered by this sort of special protection was only 4 percent as of 2016. Furthermore, special restrictions already cover 94 percent of steel imports from China, which now make up only 3 percent of all US steel imports. On March 8, President Trump announced he is imposing tariffs of 25 percent and 10 percent on all foreign sources of steel and aluminum, respectively—with the exception of Canada and Mexico, as well as possibly others—on the basis that these imports pose a threat to national security.

Five Things

  1. Steel has been the largest beneficiary of special protection for decades.
  2. More than 90 percent of steel imports from China have already been hit with special US steel tariffs.
  3. Trading partners vary considerably as to who has already been hit with US steel tariffs. China was only the 10th largest supplier of steel to the US market in 2017 ($976 million), largely because 94 percent of those exports were already subject to special tariffs.
  4. Aluminum has only recently become a beneficiary of special protection.
  5. Aluminum's special protection to date has been directed exclusively towards China

Aluminum Protection

Aluminum Share

National Security Lie

Trump's "national security" angle is an obvious lie. Most US steel imports come from allies, including Canada. Most aluminum imports come from Canada.

The above charts represent figures before Trump’s new tariffs of 25 percent on steel and 10 percent on aluminum.

Foolish Efforts

Two weeks ago I commented on the Foolishness of Trump's Steel Tariffs in One Image.

How Not to Sell Cars

It's absurd to believe steel manufacturing jobs will return to the US. Yet, let's pretend they will. What's the cost?

Jobs at Risk

There are about 6.5 million workers at manufacturers that use a lot of steel, but only 140,000 steelworkers, says Moody’s.

Pandora's Box

Not only do the steel tariffs harm US manufacturers that consume steel, they also open the door to other countries imposing tariffs on the US in the name of "national security".

"National security" now means anything any country wants it to mean thanks to Trump's blatant lie.

Mike "Mish" Shedlock.

Comments (25)
No. 1-25
Rayner-Hilles
Rayner-Hilles

Is it the case the the American President can act unilaterally if it's in the name of national security?

thimk
thimk

Trumps steel tariffs may have been a political ploy to swing the Pennsylvania Special Election in an area that used to be heavily dominated with steel mills. Nasty loss for the GOP.

Sechel
Sechel

the tariffs weren't about steel jobs they were about an election in Pennsylvania that trump didn't wan to lose

Sechel
Sechel

@Mish the idea of using ntional security to justify tariffs is nothing new. countries have been doing that for some time

Hamsta
Hamsta

Well, whatever the details on any particular commodity or service, Trump is trying to send a message to the world that the easy access to US markets is coming to an end. As a Canadian I can appreciate Canada's anxiousness to retain access to US markets via NAFTA.

Hamsta
Hamsta

Follow on... When talking about the "costs" to US consumers as a result of trade restrictions, there are two things to keep in mind - the net migration of jobs out of the US to lower cost labor markets (even in high tech) AND the overall imbalance of trade winds up ultimately as increased national debt (which at least notionally must eventually be paid). I think Trumps real beef with Canada is our protectionist stance on dairy. A lot of Canadians are sick of paying double the price for cheese and other dairy products to protect a relatively small number of domestic dairy producers. The thing though is that many of those producers are in Quebec and the government is reluctant to stir up sentiments for Quebec separations. Let sleeping dogs lie. Plus the US dairy producers are miffed too. But the US has given out trade deals to its own cost as a way of doing the Marshall plan and Trump thinks 70 years is enough.

AWC
AWC

But Mish, think of all the Share Buybacks US manufacturers will do with those jacked up steel prices they can set? Like, free money, man. Redistributed to them from all the steel consumers. Must be nice to have Big .Gov in ones pocket.

Rayner-Hilles
Rayner-Hilles

@AWC Ah I see, from Wikipedia:

"Section 301 was designed to eliminate unfair foreign trade practices that adversely affect U.S. trade and investment in both goods and services. Under Section 301, the President must determine whether the alleged practices are unjustifiable, unreasonable, or discriminatory and burden or restrict U.S. commerce. If the President determines that action is necessary, the law directs that all appropriate and feasible action within the President’s power should be taken to secure the elimination of the practice."

Rayner-Hilles
Rayner-Hilles

@AWC Well there's this: "The law does not require that the U.S. government wait until it receives authorization from the World Trade Organization (WTO) to take enforcement actions, and the President is increasingly focused on enforcing intellectual property (IP) rights (under Agreements that may be outside of the WTO) under the "Special" 301 amendments but the U.S. has committed itself to pursuing the resolution of disputes under WTO agreements through the WTO dispute settlement mechanism, which has its own timetable."

AWC
AWC

Suffice it to say, if this thing sticks, plan on seeing a lot more plastics and composites used in manufacturing here. Even then, the protectionist Luddites will bitch, because international competition will keep those materials too affordable as well. Also, get ready for all the whining about acid rain and soot again, and water pollution, after all that coal gets fired up here. Exporting pollution was OK while it lasted.

AWC
AWC

And, I guess, it just makes too much sense to keep clean tech oriented industry here, while exporting dirty, high energy consuming, low skill 20th Century industries to foreigners.

Rayner-Hilles
Rayner-Hilles

@AWC It might be quite fruitful to compile a directory of all these hidden powers the US president has, because Trump seems like the type of person who would exercise them just for the sake of entertainment and self-aggrandisement (not that I'm anti-Trump or anything; he's great fun, most hilarious president in years).

Rayner-Hilles
Rayner-Hilles

Maybe he will put tariffs on oil as well. That'll send a message to the dam Chinese!
:)

AWC
AWC

Must agree on that count. Donny is a natural when it comes to entertainment. Clem Kadiddlehopper of the Red Skelton era comes to mind.

Realist
Realist

What those graphs show me is that Trump’s tariffs are actually not a big deal since they will only apply to a relatively small percentage of overall imports, many of which already have tariffs applied. So this won’t do too much for US steel producers, and won’t hurt manufacturers as much as I originally thought (when the tariffs were going to apply to everyone). This begs the question; why all the bluster? The answers that many here have mentioned; is politics. Still, the whole exercise seems to invite retaliation from trading partners, which is not an good thing.

killben
killben

Is it likely a lot of imports from other China might be imports that have been rerouted through another country (say Canada, Mexico) from China and thus the true imports from China will be more? Now also, is it likely China will route its exports via Canada?

Rayner-Hilles
Rayner-Hilles

Somebody needs to let your friend know that they invented the nuclear bomb. He seems to be still living in 1945; And I mean that honestly, everything he says makes perfect sense, IF this was 1945. Alas, it is not 1945.

An awful lot of supposed military/gun lovers don't seem to understand the nuclear bomb has been invented actually. It's curious. Speaking as a son of a bitch who loves weapons and military as much as the next sociopathic republican, I'm keenly aware that the nuclear bomb has been invented, and all the implications that entails. Perhaps I should recommend some of my military history books concerning technology.

"The Pursuit of Power" by William H. McNeil - probably the best; amazing writer
"Of Arms And Men" by O'Connell
"From Crossbow to H-Bomb" by Bernard and Fawn M. Brodie
"Technology And War" by Martin Van Creveld

In all four of these volumes, usually towards the end, you will in fact discover, that the nuclear bomb has been invented. So brace yourself for that. Changes the nature of war between superpowers a bit, that one.

[Completely with him on the religious argument though. It is undoubtedly true that what's going terribly wrong with anglo-saxon culture the last 50 years has 50%-75% to do with the way in which Christianity has collapsed.]

whirlaway
whirlaway

Well, if Trump's national security angle is "an obvious lie", then so is trickle-down economics. That didn't prevent it from gaining currency for damn near 40 years, did it??!!

SweetKenny
SweetKenny

"Somebody needs to let your friend know that they invented the nuclear bomb. He seems to be still living in 1945; And I mean that honestly, everything he says makes perfect sense, IF this was 1945. Alas, it is not 1945." I'm not sure who you mean when you use the term "your friend" as It's an article on a website. As a Canadian who watches South Park - don't call me friend, buddy. What I took away from it was obviously different from what you took away from it. I see the argument being that the US can't compete with China in a free trade type of economy due to differences in standard of living of its citizens. Now in a perfect system, Chinese living standards would rise as US standards lower and they would equalize BUT this is impossible due to manipulation that exists within the system thanks to the FED and bubbles. It's far more complicated.

Rayner-Hilles
Rayner-Hilles

@SweetKenny Don't call me your buddy, guy!

That aside: It is the case that the greater differences between nation's standard of living was a function of its background history in "tech-capital development" as well as a subdued birth rate, making inheritance a greater parter of the wealth of each individual.

Thing is however, China has come a hell of a long way in building its own capital base of formerly-Western technology and instituting a one-child policy to hit the emergency brakes on the birth rate. And indeed, as you would expect, China has grown a considerable middle class, already far greater in number than our own. Why then should the average Chinese standard of living still be far lower than ours? The answer is because they have no country to import that standard of living from (though we wait on their progress in colonizing Africa).

You see guy, that dialysis machine that your free health care affords you, so you can go out drinking yourself to death on regular nights of debauchery, that machine was made in China by peasants whose government (excl Hong Kong) could never dream of affording dialysis machines to be freely available to everyone of its own citizens. If Canada required that all its health-care machines were to be made in Canada alone, it wouldn't be able to afford free universal health care.

A lot of people seem to think that servants went out of fashion because washing machines were invented. But in fact, the invention of washing machines and such merely permitted you to ship your servants overseas and impose immigration policy so they wouldn't come back (metaphorically speaking). Out of sight and out of mind.

And meanwhile the left can go on singing about how progressive and egalitarian we are (or should be), and how those backwards third world countries that still have a social hierarchy are yet to "catch-up with us," whilst wearing the clothes made by their overseas servants and working the subsidized domestic jobs that those same servants aren't allowed to do for lack of a visa. And if you point any of this out to them, they'll blame the right wing for all of this you see, because, the right wing is a very convenient enemy for the left to unload all of the problems of globalisation on whilst in turn claiming responsibility for all the upsides of globalisation: free health care, minimum wage, education and so on.

The game we play with China is this: they give us all of that real stuff they mass produce that raises our standard of living and we in turn sell them our finance capital; that is our currency, our bonds, our stocks, and even our property. They export their standard of living to us, and we export to them our vastly overpriced capital, built upon an ocean of bullshit of utopian expectations and Fed intervention. It's highway robbery what we do to China, giving them our finest bubbled-up capital bullshit, and they give us material happiness, but China more than consents to it by artificially holding their currency low, tariffing any real wealth we might have exported to them, and prohibiting foreigners from purchasing their capital.

Why does China do this? Well it could be that they're just incredibly stupid, that they've been hypnotised by hundreds of years of cultural Western bullshit into thinking it is better to have dollars in your central bank than food in your citizens' stomachs. - But it might also be just fabian tactics on their part: slowly building up their holdings in US capital, and ready to strike and take over when the US is weak. The reason why they might put off competing with us on exporting capital is that they're aware that we have had a serious head start in that department. It's particularly the English speaking world-war-two-winning countries that are at advantage, thanks to centuries of imperialism, we have one hell of a brand and a very old and incredibly developed finance system that nobody else, not even Europe, can compete with.

But given one financial crash: China might very well reverse all of its policies, dumping US capital, allowing its currency to rise, welcoming foreign purchases but imposing rigid immigration policy like ours, and relieving all tariffs on foreign goods and services, from its new servant class that its currently building in Africa (if it hasn't already done so), to its suddenly brand new one in the now direly-impoverished finance-crashed West (and maybe then the West will become the far-left basket case). China will have taken over the world without a shot being fired. How about that?

Of course then maybe robots from Japan take over human jobs from 50% of the population, causing such a drastic surge in inequality that countries will fragment in countless secessionary movements, and before you know it there are 50 Disunited States, some vastly vastly richer than others. And none of this more global stuff will matter in comparison.

Funny old world.