WHAT COULD POSSIBLY GO WRONG?
Financial follies and disaster in the making
One month later, the demand for steel was so high that the U.S. steel industry was running near 100% capacity. Some steel-rolling mills were even booked through June. The industry was supplying over 90% of the U.S. steel market when roughly 80% was the norm. And four months later steel prices had soared – spot prices were up more than 60%. In the year-and-a-half life of the Bush steel tariffs, roughly 200,000 Americans lost jobs due to higher steel prices. That’s an estimated $4 billion in lost wages. And in three years the price of steel and iron rose 68%. So how do the Trump tariffs compare? Today, U.S. steelmakers supply about two-thirds of U.S. demand. And much of imported steel comes in the form of products U.S. factories are unable to produce. So any major shift to domestic steel would require costly upgrades to existing facilities. There’s also the risk that the tariffs would make imported steel cheaper outside of the U.S., creating price pressure on steel-reliant American exporters, like car manufacturers.
Same tariffs, different day?
On March 1, President Donald Trump tweeted that the U.S. would impose a 25% tariff on imported steel, and a 10% tariff on imported aluminum. He also made the dubious claim that “trade wars are good, and easy to win.” What could possibly go wrong? In March 2002, the Bush administration tried something similar... Blaming an “import surge” of foreign steel, President George W. Bush announced a plan imposing tariffs as high as 30% on most types of imported steel. The belief was that the tariff would create domestic demand for U.S. steel, create jobs, and boost U.S. steel production. Back then, most steel-consuming manufacturers in the U.S. were small businesses – often fewer than 500 workers. So when the Bush tariffs were announced, these businesses quickly canceled foreign orders and bought up American steel.
14 March 2018
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