Donald Trump, Steel Tariffs, and the Costs of Chaos

[AZJoe]

From ZeroHedge:

The immediate impact will be to make the U.S. an island of high-priced steel and aluminum. …

Mr. Trump seems not to understand that steel-using industries in the U.S. employ some 6.5 million Americans, while steel makers employ about 140,000. …

Instead of importing steel to make goods in America, many companies will simply import the finished product made from cheaper steel or aluminum abroad.

Mr. Trump fancies himself the savior of the U.S. auto industry, but he might note that Ford Motor shares fell 3% Thursday and GM’s fell 4%. U.S. Steel gained 5.8%. Mr. Trump has handed a giant gift to foreign car makers, which will now have a cost advantage over Detroit. …

The National Retail Federation called the tariffs a “tax on American families,” who will pay higher prices for canned goods and even beer in aluminum cans. Another name for this is the Trump voter tax.

The economic damage will quickly compound because other countries can and will retaliate against U.S. exports. Not steel, but against farm goods, Harley-Davidson motorcycles, Cummins engines, John Deere tractors, and much more. Foreign countries are canny enough to know how to impose maximum political pain …

Then there’s the diplomatic damage … Mr. Trump is declaring a unilateral exception to U.S. trade agreements that other countries won’t forget and will surely emulate. The national security threat from foreign steel is preposterous because China supplies only 2.2% of U.S. imports and Russia 8.7%. … Canada … supplies 16%, South Korea 10%, Brazil 13% and Mexico 9%. …

Canada buys more American steel than any other country, accounting for 50% of U.S. steel exports. Mr. Trump is punishing our most important trading partner …

[AZJoe]

EU promises retaliation for Trump's tariffs.

[seapilot]

Can we get rid of the income tax now that we are back to taxing imports?

[Zippyjuan]

Can we get rid of the income tax now that we are back to taxing imports?

To replace the income tax you need about a 200% tariff on all imports.

[Danke]

To replace the income tax you need about a 200% tariff on all imports.

Or you could cut spending. Just a thought...

[Zippyjuan]

Or you could cut spending. Just a thought...

Neither party has shown any seriousness about even trying that.

[kcchiefs6465]

Although free trade is beneficial and generally most efficient from a philosophical standpoint and on paper, when you have trade imbalances like we have then it can artificially affect things like national security (not producing important goods and materials that we would otherwise produce) and it can weaken the dollar.

Balancing trade and then negotiating better trade deals can help make both countries stronger, more independent and wealthier.

I know the arguments.

"Can" "could" "might" just be bull$#@!.

[AuH20]

Trade wars lead to a greater free market, when one side relents. Trump has a huge card to play in terms of market access. The EU & Asia can't win.

[Zippyjuan]

Although free trade is beneficial and generally most efficient from a philosophical standpoint and on paper, when you have trade imbalances like we have then it can artificially affect things like national security (not producing important goods and materials that we would otherwise produce) and it can weaken the dollar.

Balancing trade and then negotiating better trade deals can help make both countries stronger, more independent and wealthier.

Strong dollar encourages a bigger trade deficit. It makes our imports cheaper for us to buy and makes goods we export more expensive for other countries to buy from us.

More imports + fewer exports= bigger trade deficit.

[specsaregood]

To replace the income tax you need about a 200% tariff on all imports.

done, lets do it. I can avoid imports.

[Zippyjuan]

done, lets do it. I can avoid imports.

Not as easily as you may think. Many domestically produced goods include imported components. Also higher prices for imports means local producers can sell their goods at higher prices so things will cost more.

[phill4paul]

... higher prices for imports means local producers can sell their goods at higher prices so things will cost more.

They'll make more money, hire more workers, give them better pay, create an American manufacturing middle-class as we once had, a middle-class means they can afford locally produced, but higher priced, products. Sounds like America before NAFTA.

[Zippyjuan]

They'll make more money, hire more workers, give them better pay, create an American manufacturing middle-class as we once had, a middle-class means they can afford locally produced, but higher priced, products. Sounds like America before NAFTA.

Assuming that the company doesn't just pocket the higher profits.



The companies needing steel and aluminum (vastly more than steel and aluminum producers- the steel industry has about 80,000 workers- metal using company workers are in the millions) will face higher costs and will raise prices of what they produce and hire fewer workers or pay the ones they have less. The steel factory gains but the rest lose. It is a net loss to the overall economy. And if the countries facing our tariffs decide to retaliate, more US companies will be hurt.

[dannno]

Assuming that the company doesn't just pocket the higher profits.



The companies needing steel and aluminum (vastly more than steel and aluminum producers- the steel industry has about 80,000 workers- metal using company workers are in the millions) will face higher costs and will raise prices of what they produce and hire fewer workers or pay the ones they have less. The steel factory gains but the rest lose. It is a net loss to the overall economy. And if the countries facing our tariffs decide to retaliate, more US companies will be hurt.

With the lower corporate tax rate, it makes more sense for the companies to re-invest their profits into the company and grow.

[dannno]

Strong dollar encourages a bigger trade deficit. It makes our imports cheaper for us to buy and makes goods we export more expensive for other countries to buy from us.

More imports + fewer exports= bigger trade deficit.

So then there is the other side of the equation which is tariffs, the side you describe then balances out the more expensive import costs from the tariffs and the cheaper goods we will export that will be cheaper once the other countries lower their tariffs in order to get more access to our markets.

Ends up somewhere in the middle, with less trade imbalances, and I'm guessing a lower trade deficit.

[Zippyjuan]

So then there is the other side of the equation which is tariffs, the side you describe then balances out the more expensive import costs from the tariffs and the cheaper goods we will export that will be cheaper once the other countries lower their tariffs in order to get more access to our markets.

Ends up somewhere in the middle, with less trade imbalances, and I'm guessing a lower trade deficit.

If the tariffs are imposed by both sides (theirs in retaliation to ours), our imports will be lower but our exports will be lower as well. The trade deficit may not shrink at all but total trade will be lower- meaning fewer jobs on both sides.

But let's look at the original reason for the tariffs- a trade deficit. Is a trade deficit necessarily a bad thing? Is a country in a bad position if they are importing more than they export? If we are richer than our trading partners, we may have a larger demand for imported goods than our trading partners. They might not be able to afford as many imports as we can. In this case, the deficit exists because we are so much better off than anybody else.

If we have to import because we are resource poor and are unable to produce what we need, then it is not a good thing. Are we resource poor and unable to produce what we need?

[r3volution 3.0]

They'll make more money, hire more workers, give them better pay

The same could be achieved by taxing consumers and giving the money to the steel producers.

...o wait, that's what this is.

In short, yes, welfare schemes work nicely from the perspective of the welfare recipients (at least in the short term).

[Superfluous Man]

To replace the income tax you need about a 200% tariff on all imports.

It wouldn't work. People would just spend less money buying imports at those higher prices. There is no possible way that tariffs could ever produce as much revenue as the income tax.

And that right there is probably the only argument in favor of replacing the income tax with tariffs that actually makes sense.

[Superfluous Man]

Assuming that the company doesn't just pocket the higher profits.

Notice the difference in scale between the left side and the right. It's a very deceptive graph.

[phill4paul]

Assuming that the company doesn't just pocket the higher profits.



The companies needing steel and aluminum (vastly more than steel and aluminum producers- the steel industry has about 80,000 workers- metal using company workers are in the millions) will face higher costs and will raise prices of what they produce and hire fewer workers or pay the ones they have less. The steel factory gains but the rest lose. It is a net loss to the overall economy. And if the countries facing our tariffs decide to retaliate, more US companies will be hurt.

Assuming that the company doesn't just pocket the higher profits.

The companies needing steel and aluminum (vastly more than steel and aluminum producers- the steel industry has about 80,000 workers- metal using company workers are in the millions) will face higher costs and will raise prices of what they produce and hire fewer workers or pay the ones they have less. The steel factory gains but the rest lose. It is a net loss to the overall economy. And if the countries facing our tariffs decide to retaliate, more US companies will be hurt.

Until American steel-works cranks up again. And it would. It will take awhile to adjust to being a producing nation again as opposed to a consuming nation. Perhaps once again we will get products such as appliances that last longer than 5 years. Perhaps American manufacturers won't have to worry about foreign governments subsidizing their manufacturing base for the sole purpose of destroying America's. God, that would be absolutely terrible.

The American bauxite industry held world importance during World War I, and from 1914 through 1920, supplied more than half the world's bauxite. In 1914 and again in 1915, the US supplied 94 percent of the world's bauxite.

https://en.wikipedia.org/wiki/Bauxit..._United_States

US iron ore made up more than a third of the world's iron ore production; the proportion of world iron ore mined in the US peaked in 1945 at 56 percent.

https://en.wikipedia.org/wiki/Iron_m..._United_States

We have it. We just have to mine it.

And what you fail to mention is that we run a trade deficit. Which means other countries sell us more than we buy from them. So if we don't buy it from them then American manufacturing sells it here. Their output is increased through domestic sales because there is not unfair trade practices involved which favor foreign manufacturing.

I watched a prosperous middle-class disappear in my lifetime because of globalization. Furniture manufacturing in N.C. It was no different from steel towns. A complete middle-class destroyed.

[r3volution 3.0]

Is a trade deficit necessarily a bad thing? Is a country in a bad position if they are importing more than they export? If we are richer than our trading partners, we may have a larger demand for imported goods than our trading partners. They might not be able to afford as many imports as we can. In this case, the deficit exists because we are so much better off than anybody else.

Trade imbalances occur constantly in a free market; any person, business, or arbitrarily selected group of the same (such as "Americans" or "Chinese") may run a trade imbalance with respect to any other person, business, or arbitrarily selected group of the same by consuming more than they produce (financing the difference by borrowing) or by producing more than they consume (the difference being savings). There is no problem with this.

Chronic trade imbalances are a different matter. These are impossible in a free market. One cannot indefinitely consume more than he produces (there are limits to borrowing), and though one could run an indefinite trade surplus (just keep saving forever and never spend your savings), this is irrational. In a free market, trade imbalances are self-correcting. Chronic trade deficits are a result of inflationary monetary policy, which makes it possible to keep borrowing indefinitely (or at least for a very long time) to finance excess consumption. The US started experiencing trade deficits because production costs were increasing relative the rest of the world. Those deficits failed to self-correct and became chronic because US monetary policy made it easy to finance consumption with debt.

So, basically, trade imbalances aren't a problem in themselves; it depends what's causing them.

...and tariffs are no solution in any case, needless to say.

[Zippyjuan]

https://www.marketplace.org/2016/08/...gy-not-trade-0

Steel's decline was about technology, not trade

“American steel,” Donald Trump intoned while laying out his economic plan in Detroit yesterday. “Steel! American steel! We'll send new skyscrapers soaring all over our country. We will put new American metal into the spine of this nation.”

Trump said he would “put our coal miners and our steel workers back to work!”

The candidate suggested that trade deals and regulation had cost the United States hundreds of thousands of jobs in manufacturing industries like auto, steel and coal. And he suggested that doing away with both would bring those jobs back.

But a look at recent research on the U.S. steel industry shows that when it comes to the decline of American steel industry jobs, globalization and regulation had very little to do with it.

In the four decades beginning in the early 1960s, the steel sector lost 400,000 jobs — a five-fold drop, according to Allan Collard-Wexler, assistant professor at Duke, who examined the history of the industry using detailed census data.

Initially, “we thought this was going to be all about trade,” he said. He was in for a surprise.

Even though jobs disappeared, actual steel output declined by a small amount, roughly 20 percent — nowhere near accounting for the loss in jobs. Steel production wasn’t leaving the United States as much as it was just requiring fewer workers.

“It was increases in the productivity of the steel industry that are generating this huge drop in employment,” said Collard-Wexler.

Specifically, something came along called the minimill – essentially a process for recycling scrap steel and turning it into higher quality steel.

It was more efficient and cheaper. “Recycling steel is a less-intensive process than smelting it from scratch,” he said.

This innovation drove a lot of steel mills out of business. Specifically, the least productive and least efficient mills. The old mills that remained in business were the ones that could produce the highest quality grades of steel.

At the same time, Collard-Wexler said, wages for the remaining steel workers rose significantly. “Steel workers today are much better paid than they were in the past.”

For Margaret McMillan, the story of American steel is a symbol of what has happened throughout the manufacturing economy. “Technology has played a huge role in changes in the manufacturing sector and in other industries as well,” she said. “It’s added value to the economy, consumer goods prices are lower because of technological progress.”

There are sectors that have lost jobs due to trade – textiles for example – and many economists believe growth in Chinese manufacturing in the early 2000s also cost U.S. jobs (though many are skeptical as to whether that damage is ongoing today). But the whole story can’t be told without technology.

US produces over 80 million metric tons and imports about 30 million a year. Only about three percent of our imported steel comes from China- who is our big trade deficit partner. Steel tariffs won't effect our trade deficit with China and won't create more jobs here.

https://www.reuters.com/article/us-u...-idUSKCN1GE10I

Following are the top steel exporters to the United States with their corresponding percentage of total U.S. steel imports:

1. Canada 16.7 percent

2. Brazil 13.2 percent

3. South Korea 9.7 percent

4. Mexico 9.4 percent

5. Russia 8.1 percent

6. Turkey 5.6 percent

7. Japan 4.9 percent

8. Germany 3.7 percent

9. Taiwan 3.2 percent

10. China 2.9 percent

The US trade deficit with China is almost $385 billion. Steel accounts for about $2 billion of that.

[dannno]

If the tariffs are imposed by both sides (theirs in retaliation to ours), our imports will be lower but our exports will be lower as well. The trade deficit may not shrink at all but total trade will be lower- meaning fewer jobs on both sides.

But let's look at the original reason for the tariffs- a trade deficit. Is a trade deficit necessarily a bad thing? Is a country in a bad position if they are importing more than they export? If we are richer than our trading partners, we may have a larger demand for imported goods than our trading partners. They might not be able to afford as many imports as we can. In this case, the deficit exists because we are so much better off than anybody else.

If we have to import because we are resource poor and are unable to produce what we need, then it is not a good thing. Are we resource poor and unable to produce what we need?

Your retaliation theory is missing half my argument... the other side already has big tariffs and we have refused to do anything to stop that so they just continue increasing them. This will bring them to the table because they want to continue to export and so they may reasonably agree to lower their tariffs, and we may reasonably agree to lower ours. That is the whole point.

[phill4paul]

https://www.marketplace.org/2016/08/...gy-not-trade-0



US produces over 80 million metric tons and imports about 30 million a year. Only about three percent of our imported steel comes from China- who is our big trade deficit partner. Steel tariffs won't effect our trade deficit with China and won't create more jobs here.

Steel isn't the only tarriffs imposed so far. There's solar panels and large tub washing machines. And hopefully much more to come.

The U.S. trade deficit with China was $375 billion in 2017. The trade deficit exists because U.S. exports to China were only $130 billion while imports from China were $506 billion.

https://www.thebalance.com/u-s-china...utions-3306277

[axiomata]

“Government, begotten of aggression and by aggression, ever continues to betray its original nature by its aggressiveness.”

“We let ourselves be deceived by words and phrases which suggest one aspect of the facts while leaving the opposite aspect unsuggested…so-called protection always involves aggression…the name aggressionist ought to be substituted for the name protectionist. For nothing can be more certain than that if, to maintain A’s profit, B is forbidden to buy of C, or is fined to the extent of the duty if he buys of C, then B is aggressed upon that A may be ‘protected.’ Nay, ‘aggressionists’ is a title doubly more applicable…since, that one producer may gain, ten consumers are fleeced.”

“The like confusion of ideas…may be traced throughout all the legislation which forcibly takes the property of this man for the purpose of giving gratis benefits to that man.”

“No defense can be made for this appropriation of A’s possessions for the benefit of B, save one which sets out with the postulate that society as a whole has an absolute right over the possessions of each member.”

https://fee.org/articles/herbert-spe...ggression-ism/

[Zippyjuan]

Steel isn't the only tarriffs imposed so far. There's solar panels and large tub washing machines. And hopefully much more to come.

The U.S. trade deficit with China was $375 billion in 2017. The trade deficit exists because U.S. exports to China were only $130 billion while imports from China were $506 billion.

https://www.thebalance.com/u-s-china...utions-3306277

Steel accounts for less than $2 billion of that deficit (one half of one percent). Even if we cut 100% of imports of steel from China, it would have little impact on the trade deficit.

[Voluntarist]

xxxxx

[phill4paul]

Steel accounts for less than $2 billion of that deficit. Even if we cut 100% of imports of steel from China, it would have little impact on the trade deficit.

Gotta start somewhere. And it's not all about the China. It's the fact that we are the largest importer of steel in the world. It doesn't matter where it comes from.

[axiomata]

Notice the difference in scale between the left side and the right. It's a very deceptive graph.

That's not the only reason that chart is meaningless. It doesn't include employee benefits, which due to the rising cost of healthcare and the tax advantaged properties of non wage compensation, have been increasing.

Also meaningless to make GDP the denominator in stead of national income.

Edit: link saying essentially the same thing
https://www.nationalreview.com/2014/...-matt-palumbo/

[Zippyjuan]

Gotta start somewhere. And it's not all about the China. It's the fact that we are the largest importer of steel in the world. It doesn't matter where it comes from.

Of course- we are also the largest economy in the world.

The US trading partner this would most effect is Canada- our biggest trading partner (not counting services we have $582 billion in trade with Canada and $535 billion with China)- and we are about even in our trade balance with them.

https://www.thebalance.com/trade-def...county-3306264