Steel lobby’s PR blitz can’t paper over damaging effects of tariffs

In the face of increasing opposition from Congress and its own manufacturing industry customers alike, the U.S. steel industry recently launched a PR campaign in hopes of preserving the punitive tariffs that currently impose a 25-percent tax on imported steel products (their competition).

Yet no amount of positive spin can paper over the flawed logic and economic damage that define these protectionist policies.

{mosads}Let’s start with the underlying premise of the steel tariffs, supposedly imposed due to “national security” reasons, using the Section 232 trade provision. A close look at that claim quickly exposes its cracks.

Data from the American Iron and Steel Institute — the steel industry’s pro-protectionism trade association —reveals that only 3 percent of domestic steel shipments are actually related to national security purposes.

Like other industries, steel has had its ups and down, but profits were strong for most major U.S. steel companies entering 2018. There was certainly no steel “crisis” threatening our country’s national security.

No wonder members of Congress from both sides of the aisle decided to take action to curtail the politicization of national security for trade purposes. Sen. Pat Toomey (R-Pa.) and Sen. Mark Warner (D-Va.) introduced a bill that would require approval from Congress before a President can use national security to create import barriers.

The bill contains a provision that would allow Congress to remove the current steel tariffs. Shortly thereafter, Sen. Rob Portman (R-Ohio) and Rep. Ron Kind (D-Wis.) introduced another bill to limit the application of “national security” reasons for tariffs in the future, doing so in conjunction with a slate of elected leaders from both parties and both houses of Congress.

Congress doesn’t agree on much these days, so the fact that such a strong show of interest has coalesced around legislation to curtail Section 232 abuses like the steel tariffs sends a strong signal of how much skepticism the steel industry’s self-serving protectionism has generated outside the industry itself.

Contrary to what steel companies claim, thousands of manufacturing businesses that need steel around the U.S. have been subject to price hikes, delivery delays and the outright unavailability of steel products they depend upon to make their businesses work. Tellingly, these price hikes and delays occur regardless of whether they obtain their steel from imported or domestic sources.

None of this comes as a surprise; the exact same pattern occurred in 2002, the last time steel tariffs were imposed by President George W. Bush. What happened then is repeating itself now. Cutting the U.S. off from the global steel market inevitably turns us into an island of high steel prices amid a competitive global industry, since the domestic steel industry simply does not produce enough steel to meet demand.

Stuck on that island of high prices, our steel-using manufacturers must nevertheless compete every day against foreign companies offering similar products made from steel purchased abroad at regular market prices.

When U.S. manufacturers pay hundreds of dollars a ton more for steel than others, the price of their products goes up, leading their customers to look at sourcing those same products overseas. The basic economics are easy to grasp. The fact that we’ve allowed this to happen again is what’s so hard to understand.

The Trump administration got off to a strong start with tax reform and the rollback of regulations that inhibited productivity. Businesses around the country applauded. But steel-using manufacturers in the U.S. now find themselves with their backs to the wall thanks to a massive tax hike in the form of tariffs.

In the end, everyone loses. Those manufacturers are the domestic steel industry’s customers. When their businesses decline, so will the steel industry’s business.

It’s time to focus on the job security of the 6.8 million Americans working in steel-using manufacturing jobs, and the financial security of the mom-and-pop businesses that supply U.S. companies with manufactured goods and sustain communities across the nation with good-paying jobs.

For those truly interested in America’s national security, that seems like a good place to start.

Paul Nathanson is executive director for the Coalition of American Metal Manufacturers and Users, which comprises over 30,000 U.S. companies in the manufacturing sector and downstream supply chains of industries.