Tariffs on steel and aluminum wipe out more jobs than they save, because “steel is produced by a tiny sliver of the economy, but used as an input by a much broader swathe of manufacturers,” notes Justin Wolfers, an economist at the University of Michigan.
But President Trump announced that he is raising tariffs on steel and aluminum, reports CNN:
President Donald Trump announced Friday that he would set tariffs on steel imported into the United States at 50%, double their current rate.
At a US Steel facility in West Mifflin, Pennsylvania, Trump said he had a “major announcement.” To an applauding crowd of US Steel employees, Trump said he would jack up the tariff to protect America’s steelworkers.
“We are going to be imposing a 25% increase,” Trump said. “We’re going to bring it from 25% to 50%, the tariffs on steel into the United States of America, which will even further secure the steel industry in the United States. Nobody’s going to get around that.”
Trump said he was considering a 40% tariff, but industry executives told him they wanted a 50% tariff.
“At 25% they can sorta get over that fence,” Trump said. “At 50% nobody’s getting over that fence.”
He later posted on social media that the higher tariff rate would take effect on Wednesday, June 4th.
“It is my great honor to raise the Tariffs on steel and aluminum from 25% to 50%, effective Wednesday, June 4th….
Although tariffs may have given the moribund American steel business a much-needed boost, they could raise prices on a key ingredient for American construction and manufacturing – two industries Trump has said he wanted to support. Spot prices for domestically-sourced steel have increased since the announcement of the 25% tariff in March, as American producers didn’t have to worry about as much competition from foreign steel.
In 2018, when Trump imposed some steel tariffs in his first term…it sent costs rising for cars, tools and machines and shrank those industries’ output by more than $3 billion in 2021, the International Trade Commission found in a 2023 analysis.
As Investopedia notes, steel and aluminum tariffs have a history of wiping out more jobs than they save: The steel and aluminum tariffs Trump imposed back in 2018 shrank employment by 74,000 jobs, wiping out 75 times more jobs than they saved:
In 2018, Trump imposed a 25% tariff on steel and a 10% tariff on aluminum imports in an effort to give U.S. steel producers a leg up and stop job losses in that industry. He later granted exemptions to allied countries, including Canada and Mexico….U.S. steel manufacturers added about 1,000 new jobs as foreign-made steel suddenly got more expensive, making U.S.-made steel more competitive, according to a 2020 analysis by economists…
Unfortunately for the U.S. economy, there are many more industries that use steel than make it. Companies making auto parts, motorcycles, household appliances, various kinds of machinery, batteries, and military vehicles suddenly had their costs increase.
As a result, by 2019, those companies had hired 75,000 fewer people than they would have without the tariffs.
Earlier, America’s biggest aluminum producer, Alcoa, said Trump’s 25% tariffs on aluminum wouldn’t result in it reopening U.S. plants it shut down, because it was so much more efficient to import aluminum from Canada, where costs are lower, and energy is cheaper. As a web site explains, “In the US, industrial electricity prices are significantly higher than in Canada, where most aluminium smelters are concentrated in Quebec. Thanks to abundant, low-cost hydroelectric power, Canadian smelters enjoy energy prices up to three times lower than their US counterparts.”
Industry Week reported that
Instead of restarting idled capacity, [Alcoa CEO] Oplinger said “the most efficient aluminum supply chain” is shipping product from Canada. About 70% of the 4.2 million metric tons of primary aluminum U.S. companies imported last year came from north of the border, he said, while idled smelting capacity in the United States is only 600,000 metric tons.
“It takes many years to build a new smelter and at least five to six smelters would be required to address the U.S. demand for primary aluminum,” Oplinger said. “These new smelters would require additional energy production equivalent to almost seven new nuclear reactors or more than 10 Hoover Dams.
As The Transcript explains, “Alcoa has been educating U.S. officials on the structural infeasibility of reshoring aluminum smelting capacity: ‘The U.S. right now has no ability to meet the current import need.'” Alcoa says, “The U.S. is importing over 4,000,000 metric tons of aluminum per year. About two-thirds of that is coming from Canada. We only have 600,000 tons of curtailed capacity. So The U.S. right now has no ability to meet the current import need. We would need four to five new smelters. So think about that in terms of the investment that would be required. It would take five to seven years to build those smelters. You’re looking for a payback period, probably over fifteen years on that. And then think about the power that’s needed, about 12 terawatt hours of power needed for each smelter. So these are points that the U.S. administration was initially unaware of.”
Apparently, Trump is still unaware of these realities. Alcoa’s education effort has largely failed.
