Tariff protection for US steel manufacturers causes job losses

March 12, 2003

Free Market Foundation

Most economists concede that President Bush’s worst economic decision was to impose tariffs of 30 percent on imported steel last year. The consequences have been far-reaching and most unwelcome for America’s struggling economy.

The initial impact of the tariffs was to shut off foreign competition and allow U.S. steel makers to hike their prices.

A recent study by economist Joseph Francois and Laura Baughman, president of Trade Partnership Worldwide, found that more Americans lost their jobs last year to higher steel prices than the total number employed by the U.S. steel industry itself.

The study shows that the tariffs created supply shortages by deterring imports and gave U.S. steel producers enormous pricing power.

The shortages and price hikes hit domestic steel-consuming businesses hard.

The vast majority of those are small businesses with an estimated 98 percent of all the 193,000 U.S. firms in steel-consuming sectors employing fewer than 500 workers.

These smaller firms, in turn, were forced to cut jobs.

The study, commissioned by the Consuming Industries Trade Action Coalition, estimates that higher steel prices have caused at least 4,500 job losses in no fewer than 16 states.

These casualties include over 19,000 jobs in California alone, nearly 16,000 in Texas, more than 10,000 in Ohio, and nearly 10,000 apiece in Michigan and Illinois.

That equates to around $4 billion in lost wages and purchasing power.

Source: Editorial, The Steel Tariff’s Costs, Wall Street Journal, February 25, 2003.

For more on Tariffs http://www.ncpa.org/iss/tra/

FMF Policy Bulletin/4 March 2003