Trump's Steel and Aluminum Protectionism: Let the Tariff Torture Begin

Last week, President Trump announced that he is going to impose a 25 percent tariff on steel and a 10 percent tariff on aluminum. The President framed his move both in economic terms of helping out the manufacturing industry (U.S. steel in particular) and as a national security concern. I have written on this topic myself in the past, so at least I don't expect my remarks on Trump's biggest international trade policy shift since withdrawing from the Trans-Pacific Partnership to be terribly long. I can say with confidence that tariffs are generally a deficient way of going about international trade policy. Since I looked at the issue shortly after Trump initially announced his intent in 2017 vis-à-vis a Section 232 investigation to analyze the potential of such a trade barrier, I concluded that it would be unacceptable, to say the least. Not only did I conclude that there was no national security justification, I scrutinized what happened the last time we imposed such tariffs in 2002. The answer? 200,000 jobs lost and less economic growth. Rather than re-analyze something I have scrutinized, I will simply add links to the latest studies and analysis of the topic below:

1. Net loss of jobs. An economic consulting firm, Trade Partnership, examined what the effects of the tariff would be (see report here). Their estimation was that a net 146,000 jobs would be lost.  What their calculations mean is that for every job gained in steel production, five jobs would be lost for those who use steel in their manufacturing process. This matches up with the economic theory that tariffs cause a net loss in employment. 
2. Effects on state economies. The centrist Brookings Institution analyzes how this could have a ripple effect for states that are more reliant on the steel and aluminum industries. 
3. Macroeconomic effects. Moody's stated that the tariffs could exacerbate inflationary pressures, tighten [profit] margins, and increase supply chain disruptions in the manufacturing sector. Barclay's is anticipating that the tariffs will cause inflation to increase by 0.1 percent.
4. Increased likelihood of trade war. While we were able to avoid a trade war in 2002, Trump's tariff is different in that of scope. In the past, it has been limited by country. Also, Trump is using a more opaque investigation process than past presidents, which gives Trump more latitude, not to mention that using Section 232 means that they won't decline over time like they do Section 201 [à la President Bush]. A broader tariff, as opposed to one that targets a country such as China, means that all countries are affected. Some of the largest steel importers are the United States' allies: South Korea, Germany, Canada, and Japan.  Per World Trade Organization (WTO) laws, allies could retaliate to a point, as the Peterson Institute points out. The European Union already expressed the possibility of trade retaliation in the amount of $3.5B. A tariff is what a country does to itself in a time of peace what a foreign nation intends to inflict with a blockade in a time of war. As the Cato Institute illustrates, no one wins in a trade war, and I wish Trump would have realized that before making this into law. 
5. Articles about the economics and economic history of tariffs written in response to Trump's tariffs: see here, here, here, and here. Oh, and here is one article going into how we have tried tariffs before and how little they prevented economic decline in the targeted industry.

There is the economic theory, historical precedent, and considerable amount of empirical evidence showing how such a tariff would be awful for the United States. There is no economic or national security basis for Trump's decision. What we see here is that the amount of evidence disproving Trump's ideas about tariffs is piling up. The most probable outcomes of these tariffs will be fewer jobs, less economic output, significantly higher prices for products with steel and aluminum, and trade retaliation that could very well lead to an all-out trade war. All I can say to conclude at this juncture is that it is a shame that Trump's faulty decision is going to negatively affect millions.  

3-9-2018 Addendum: The Council on Foreign Relations is estimating that the tariffs will eliminate 40,000 auto industry jobs, which is equivalent to a third of the steel industry.

3-13-2018 Addendum: A panel of prominent economists were asked whether these tariffs would improve Americans' welfare. None of them said "yes." And then there is this letter from the Department of Defense in response to Trump's tariffs. The Pentagon has an incentive to overstate the "national security." If the DoD is opposed to the scope and severity of Trump's tariffs, it shows just how unnecessary the tariffs really are.

7-20-2018 Addendum: According to the Right-leaning American Action Forum, these tariffs are expected to cost American consumers $7.5 billion a year.