New tariffs bad news for economy, consumers

There’s never a good time for tariffs. American workers and consumers will pay dearly for the Trump administration’s short-sighted action to protect an industry that shows no signs of needing any protection—the market values of the five largest steel companies have more than doubled over the past five years. Yet with a major infrastructure spending bill set to come through Congress over the next year, Trump’s tariffs are bad policy with even worse timing.

While a small amount of people will benefit from the proposed tariffs, many more will be harmed. The American steel industry employs roughly 140,000 workers, but industries that rely on steel to create their products—the ones who will suffer directly under the tariffs—employ 6.5 million workers. A recent study by the Trade Partnership found that the direct cost of tariffs on employment would be 18 jobs lost for every one created. On net, 470,000 Americans could lose their jobs.

{mosads}The Trade Partnership’s study fits with the lessons of recent history. In 2002, President Bush instituted protective tariffs on foreign steel imports. After just a year in which steel prices rose by up to 50 percent, steel production was insufficient to meet demand, 200,000 Americans lost their jobs, and the tariff was dropped. A mere fifteen years later, these lessons have already been forgotten.

Nor will other countries sit idly by as Trump restricts trade. Well over 10 million Americans’ jobs are supported by exports—jobs which would be at risk in the case of a trade war. Already, the European Union has prepared a ten-page hit list of potential targets of retaliatory tariffs should Trump’s steel and aluminum tariffs go into effect.

American consumers will be harmed as well. A combination of new steel tariffs and lumber tariffs imposed last year mean that the cost of new homes is likely to continue rising—nearly half of steel imports go towards construction. Other American staples such as cars and canned beer are also set to see price spikes resulting directly from tariffs.

If the impacts on American workers are not enough to convince President Trump not to institute these tariffs, he should consider the plight of America’s coffers. In January, the president laid out a plan to use federal funds to leverage $1.5 trillion in investment on infrastructure. Given the importance of steel in infrastructure improvements, instituting steel tariffs now would result in the government’s infrastructure investments being less cost-effective, likely causing the price tag to climb. With the national debt having just gone over $21 trillion, this is hardly the time to be making already expensive projects even more expensive.

Tariffs could also nullify some of the benefits of tax reform at a time when Americans finally stand to see new jobs and real wage growth. Already, millions of Americans have benefited from bonuses, wage increases, and increased retirement plan contributions. A recent survey of CEOs following the passage of tax reform found a significantly higher number of executives expecting increases in hiring, investment and sales. However, that survey was taken before the announcement of steel and aluminum tariffs. Americans that have been struggling under stagnant wages and a lack of available jobs should not be forced to contend with harmful tariffs just as they stand to reap the benefits of tax reform.

Steel and aluminum tariffs will harm American workers, businesses and consumers. However, they also come at a time when a major infrastructure bill is set to come up in Congress, and American workers are just beginning to see the benefits of tax reform. These tariffs are a poor idea with even poorer timing, and the president should set them aside before they have a chance to harm Americans.

Andrew Wilford is an Associate Policy Analyst with the National Taxpayers Union Foundation. Follow him on Twitter @PolicyWilford.