The Section 232 Steel and Aluminum Tariffs Under Trump and Biden Unsurprisingly Underdelivered

Economists have long recognized tariffs as having a negative impact on the economy, which makes sense when you look at the mainstream microeconomic theory on tariffs. In 2018, President Trump enacted tariffs on steel and aluminum under Section 232. Before enacting these tariffs, I criticized President Trump's idea based on the merits of the argument. Trump was unable to meet a burden of proof to show how a tariff would help national security nor did he consider the economic implications of such a tariff in light of the fact that past steel tariffs for national security purposes harmed the economy. As a research paper released last week from the Right-leaning Tax Foundation about the Section 232 tariffs on steel and aluminum illustrates, I was right to worry about the tariffs. Here are a few key findings from the Tax Foundation's research paper:

• For each 1 percent increase on the tariffs, export growth fell by 0.11 percent (Handley et al., 2020). 
• While the tariffs raised aggregate in the steel industry in 2018, it also cost steel consumers $5.6 billion. Not only did the tariffs create net economic growth, but it also meant that each of the 8,500 that the tariffs did create cost $650,000 each.
• Contrary to Trump saying that China would pay the tariffs, it turns out that it was U.S. firms and consumers that paid the price (Amiti et al., 2020). Prices increased 22.7 percent for covered steel and 8.0 percent for covered aluminum. 
• The U.S. International Trade Commission estimated that the tariffs reduced steel and aluminum imports by 24 and 31.1 percent, respectively. 
• Downstream industries that use steel and aluminum experienced an annual $3.4 billion loss in production from 2018 to 2021.
• According to Tax Foundation estimates, removing the tariffs would increase long-term GDP by 0.02 percent and create more than 4,000 jobs. Some estimates have Section 232 tariffs reducing manufacturing employment by a net of 75,000 jobs.

As we see above, these tariffs have been far from being a steal. These tariffs harm the economy with no apparent national security benefit, which is why I in favor of repealing them. Tariffs are taxes on imports, so it would not surprise me to see the repeal of those taxes boost GDP and create more jobs. As much as President Trump initiated the Section 232 tariffs, it was Biden who kept them intact. As I pointed out a couple of weeks ago, Biden is as capable of being protectionist as Trump. Unless action is taken to return powers regarding tariffs over to Congress, as has historically and constitutionally been the case, Biden will not be the last president to abuse Section 232.