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Saturday, March 17, 2018

Trump’s New Tariff Is Putting America Last

President Donald Trump’s new attempt at putting America first is going to hurt the economy.


President Donald Trump’s new attempt at putting America first is going to hurt the economy.

Making good on his campaign promise, last week President Donald Trump signed an order creating a new tariff on steel and aluminum, going against his economic advisors. The tariff would be a 25% tax on steel, and a 10% tax on aluminum entering the country from anywhere in the world. The only countries that would be exempt would be Canada and Mexico.

A strong steel and aluminum industry are vital to our national security, absolutely vital,” said President Trump in a news conference. “Steel is steel. You don’t have steel, you don’t have a country.”

Indeed the growth of the steel industry is important, but such a tax on imported steel would only impede economic growth instead of fostering it.

Trump’s tariff stemmed from a 2017 Commerce Department report, which claimed that lower quality metal imported at a lower cost than that available within the U.S. presented a threat to U.S. national security by undermining the U.S. manufacturing base.

If President Trump were to institute a tariff, it would effectively raise the price on incoming steel and aluminum. Therefore, American manufacturers would be better able to compete against global consumers, and more likely to save American jobs… in theory.

Tried and Failed

Simply put, American steel and aluminum cost more to produce, and in turn will increase the consumer cost. On the production end, industries related to steel and aluminum are more likely to lay off workers in order to accommodate for increased costs.

By increasing the price of steel, the prices of everything else made from steel skyrocketed.

Such policies have been tried before and they have failed disastrously. Both former Presidents Bush and Obama placed a temporary tariff on steel in order to curb Chinese imports. As a direct result, the U.S. steel industry experienced little to no job growth and consumer prices rose sharply. Naturally, by increasing the price of steel, the prices of everything else made from said steel also skyrocketed.

The estimated job loss from these price increases in the Bush administration alone was 26,000–200,000. Furthermore, studies about steel protectionism in the US in the 1970s concluded that consumers paid an additional $290,000 for every single American job that was saved in manufacturing.

President Trump loudly proclaimed that the tariff was not only created to save American jobs, but also stop low quality, low price imports of Chinese goods. However, it turns out that China is only the 10th largest supplier of steel in the US economy. In fact, South Korea exports almost 3 times as much steel to the U.S. as China does. This tariff is not only going to hurt China, but every other country that exports steel to the U.S., including our allies.

While among U.S. steel and aluminum production companies competition will increase, overall the competition on the international stage is going to decrease. Other countries will no longer try to sell their steel and aluminum to the U.S. because the tariff would no longer yield an attractive profit. U.S. companies will never be able to match the low prices of international producers given the minimum wage laws and environmental regulations, to name a few.

Once we remove import tariffs, production companies will compete in a global free market with the goal of low prices.

A World without Tariffs

Now let us take a minute to think about what the steel and aluminum economy would look like without tariffs. Tariffs essentially serve as a shackle on the ankles of production companies; once we remove import tariffs, production companies will compete in a global free market with the goal of low prices.

A decrease in the costs of aluminum and steel products would ultimately increase jobs in industries that rely on those products. For example, the price of beer would decrease (just in time for St. Patrick’s Day) because the drop in price for aluminum would open up more capital for business expansion. Thus, companies like Sam Adams or the local brewery would be able to hire more employees to increase production. Beer retailers would be able to sell beer at a lower price, and make 91 million beer consumers in America happy.

The only way to ensure we as Americans see economic growth in terms of more jobs and lower costs is to allow the free market to work and foster healthy competition. Trump’s tariff is going to do the exact opposition. Perhaps, he should have listened to his economic advisors.


  • Zach Lang studies Political Science and Economics at St. Lawrence University. He is also a Media Ambassador for Young Americans for Liberty.