Obama's Steel Tariffs Will Hurt U.S. Economy
Free trade brings out the most prosperity.
This week, the Obama administration slapped a whopping 522% tariff on cold-rolled steel produced in China — a move that smacks of cronyism and will damage U.S. manufacturing. For context, George W. Bush set a tariff against Chinese-made steel in 2002. While the threshold stood at 30%, it’s estimated that relatively modest tariff cost this nation 200,000 jobs and $4 billion in lost wages.
A complaint from U.S. Steel Corp. might have something to do with Barack Obama’s tariff. In April, the company complained to U.S. International Trade Commission alleging a laundry list of Chinese steel companies were dumping cheap steel on the United States — good for American manufacturing, bad for the steel companies. The complaint came as the steel producers of the world met in Brussels and agreed to cut back on their steel production but China refused. Sound familiar? A year ago Saudi Arabia refused to cut back on its oil production as the price per barrel bottomed out.
As part of his campaign, Donald Trump promised a battery of tariffs against places like Mexico and China in order to protect U.S. manufacturing jobs. If his plan worked, it would cost America an estimated $6,000 per household. As the Wall Street Journal editorial board pointed out, Obama is merely employing some of Trump’s policies. Protectionism might be an alluring idea at the populist level, but the policy rarely works. History has demonstrated its shortfalls. Rather, free trade brings out the most prosperity.
To that end, the U.S. International Trade Commission released a study Wednesday that concluded Obama’s Trans Pacific Partnership will modestly benefit the economy. It will help American agriculture and services sector. However, the agreement to trade with countries ringed around the Pacific that are not China could lead to more manufacturing jobs sailing overseas. While TPP is not without it’s problems — the stink of cronyism surrounds it too — it’s a better strategy to counter China’s aggression to open trade with other countries than to close things down.