NCPA - National Center for Policy Analysis

The Steel Tariff Decision

March 31, 2003

A little over a year ago, on March 5, 2002, President Bush made a serious mistake by imposing tariffs on imported steel. As a result, many other industries were forced to sacrifice far more than steel producers made, says Bruce Bartlett.

The higher steel prices resulting from import restrictions have encouraged producers to expand even though world steel capacity is far greater than needed. In short, tariffs have done more to prevent restructuring than bring it about, which has affected the whole economy, he says.

Last month, the Consuming Industries Trade Action Coalition, a business group, published a study showing that:

  • About 200,000 jobs were lost among steel users, while there are only 187,000 total people employed in the steel industry.
  • Sixteen states lost at least 4,500 jobs, including California (19,392), Texas (15,826), Ohio (10,553), and Michigan (9,829).

Not surprisingly, profits are up among steel producers and down among steel users:

  • Prices for motor vehicles are down 2.3 percent, motor parts are down 1.3 percent and machine tools are down 1.9 percent.
  • Fabricated metal products are up just 1 percent and the overall producer price index is up 3.5 percent.
  • The motor vehicle industry lost $7.6 billion, industrial machinery lost $2.5 billion, and the fabricated metal products industry saw profits fall from $9 billion in 2001 to $5.8 billion last year.

According to press reports, the World Trade Organization has ruled that the U.S. steel tariffs imposed last year violate trading rules that we have agreed to abide by. Although the Bush Administration intends to appeal the ruling, its best course would be to just let the tariffs die, Bartlett explains.

Source: Bruce Bartlett, "The Steel Tariff Decision," March 31, 2003, National Center for Policy Analysis.

 

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