A Pro-Union Case for Steel Tariffs

Leo Gerard, United Steelworkers President April 2, 2018

In 2016, the United States imported five times as much primary aluminum as it made. (Photo by Scott Olson/Getty Images)

A great wail­ing and gnash­ing of teeth arose across the land after the Trump admin­is­tra­tion announced its plan to place tar­iffs of 25 per­cent on import­ed steel and 10 per­cent on import­ed aluminum.

House Speak­er Paul Ryan claimed the mod­er­ate­ly sized tar­iffs on two met­als would reverse the eco­nom­ic boon he thinks will sure­ly be cre­at­ed by the tax breaks his par­ty gave to cor­po­ra­tions and the rich. The good times would be over. Kaput!

This dra­ma comes from a politi­cian who pro­posed a bor­der adjust­ment tax on all imports, not just two met­als, that would have cost Amer­i­can con­sumers $1 tril­lion. This hys­te­ria comes from cor­po­ra­tions that use steel and alu­minum and are appar­ent­ly just fine with Chi­nese trade vio­la­tions com­plete­ly killing off Amer­i­can producers.

The U.S. Depart­ment of Com­merce esti­mates the cost of the tar­iffs to the U.S. econ­o­my at $9 bil­lion, which is a frac­tion of 1 per­cent of the nation’s GDP, and a frac­tion of the cost of Ryan’s bor­der adjust­ment tax.

The bev­er­age indus­try went crazy any­way. Coors, for exam­ple, claimed the tar­iffs would cost jobs across the beer indus­try and Amer­i­can con­sumers will suffer.”

Here’s what Coors calls suf­fer­ing: a pen­ny price hike. There is about three cents’ worth of alu­minum in a beer can. A 10 per­cent tar­iff on alu­minum could increase the price of an entire six-pack of Coors by not quite two cents.

Frankly, an extra pen­ny or two doesn’t sound like real suf­fer­ing. It’s not clear just how many foot­ball fans would for­go the six-pack for Sunday’s game because of that extra pen­ny. It’s not clear just how many beer indus­try jobs will real­ly be lost.

The addi­tion­al cost to a new car, which con­tains much more steel and alu­minum, would be more sig­nif­i­cant. A senior econ­o­mist at Cox Auto­mo­tive esti­mat­ed it at $200.

But that’s only if Amer­i­can alu­minum and steel com­pa­nies raise their prices by 10 and 25 per­cent, respec­tive­ly. They are not sub­ject to the tar­iffs, so they don’t have to.

The tar­iff pro­pos­al wasn’t sud­den or out of the blue. It came after the pres­i­dent announced last April that the Com­merce Depart­ment would eval­u­ate whether the dam­age done to the Amer­i­can steel and alu­minum indus­tries by bad trade prac­tices endan­gered nation­al secu­ri­ty. Com­merce told the pres­i­dent in Jan­u­ary that it did. And it rec­om­mend­ed reme­di­a­tion through tar­iffs, import lim­its or both.

Chi­na is mas­sive­ly over­pro­duc­ing these met­als at mas­sive­ly sub­si­dized mills. It then dumps its excess alu­minum and steel on the world mar­ket at super-dis­count­ed prices. The Unit­ed States, in con­junc­tion with Euro­pean allies and oth­ers, has repeat­ed­ly over the past decade nego­ti­at­ed with Chi­na to stop defy­ing the rules it agreed to abide by when it gained entrance to the World Trade Orga­ni­za­tion in 2001. Chi­na repeat­ed­ly has said it would. And then it doesn’t.

Repeat­ed­ly, the Chi­nese have, instead, con­tin­ued run­ning dan­ger­ous and envi­ron­men­tal­ly tox­ic mills and con­struct­ed new ones, fur­ther increas­ing over­ca­pac­i­ty. In 2016, for exam­ple, Chi­na increased its steel-mak­ing capac­i­ty by 36.5 mil­lion tons. That is almost half the U.S. out­put for 2016.

This has killed Amer­i­can mills, thrown tens of thou­sands out of work and dev­as­tat­ed mill towns. Steel employ­ment in the Unit­ed States has declined 35 per­cent since 2000, with 14,500 work­ers los­ing their jobs between Jan­u­ary of 2015 and June of 2016. The plum­met in alu­minum employ­ment was even steep­er, with 58 per­cent of jobs lost between 2013 and 2016.

In 2000, 105 com­pa­nies pro­duced raw steel at 144 U.S. loca­tions. Now, 38 com­pa­nies forge at 93 loca­tions. Over the past six years, six alu­minum smelters closed per­ma­nent­ly. Just five remain, with only two oper­at­ing at full capac­i­ty. And only one of those pro­duces the high-puri­ty alu­minum required for defense aero­space needs.

The declines in U.S. steel and alu­minum pro­duc­tion occurred despite increased domes­tic demand for both. In 2016, the Unit­ed States import­ed five times as much pri­ma­ry alu­minum as it made.

Most of the alu­minum import­ed into the Unit­ed States comes from Cana­da, a coun­try that respects trade reg­u­la­tions and oper­ates a mar­ket econ­o­my, just like the Unit­ed States. So Trump was right to exclude Cana­da from the tariffs.

To see real suf­fer­ing, Coors might take a look at unem­ployed alu­minum and steel work­ers and their crum­bling com­mu­ni­ties. U.S. Steel, Repub­lic Steel and Cen­tu­ry Alu­minum have announced that the tar­iffs will enable them to reopen closed mills and rehire as many as 1,700 work­ers. Unlike Coors, con­ser­v­a­tive com­men­ta­tors and Paul Ryan, most Amer­i­cans are will­ing to pay the extra pen­ny per six-pack.

Leo Ger­ard is inter­na­tion­al pres­i­dent of the Unit­ed Steel­work­ers Union, part of the AFL-CIO. The son of a union min­er; Ger­ard start­ed work­ing at a nick­el smelter in Sud­bury, Ontario, at age 18, and rose through the union’s ranks to be appoint­ed the sev­enth inter­na­tion­al pres­i­dent Feb. 28, 2001. For more infor­ma­tion about Ger­ard, vis­it usw​.org.
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