NCPA - National Center for Policy Analysis

Steel Tariffs Boomerang on Americans

May 31, 2002

Less than three months after the Bush administration suggested its stiff new tariffs on steel imports would have only a limited impact on prices, the levies are sending waves of pain through America's manufacturing sector -- including steep price increases, supply shortages and layoff threats.

  • Steel makers are said to be seeing how much they can charge before buyers cut back on purchases -- and price increases of 20 percent to 30 percent seem to be common.
  • Manufacturers are reportedly in a major panic and their anger is apparent as they complain that the president's help to one industry is hurting hundreds of companies that employ far more workers.
  • Bush administration officials blame promises made by steel manufacturers before the tariffs went into effect -- for example, U.S. Steel Corp. chief executive Thomas Usher reassured the Senate in February that the levies "will only result in modest and reasonable price increases."

But in fact, prior contracts are being broken throughout industry and executives of companies that use large amounts of steel are desperately scrounging for supplies.

The administration's intent in imposing three-year tariffs of as much as 30 percent was to curbs imports without ruffling domestic steel users; but they have conceded that they were unable to estimate what would happen to prices.

Now the picture is clear: buyers boosted purchases even before the tariffs went into effect, causing prices to jump an additional $40 to $75 a ton. With imports plunging more than 30 percent due to the tariffs, hot-rolled prices are now at about $300 a ton versus $210 late last year.

Source: Neil King Jr. and Robert Guy Matthews, "American Feels Pain of Steel Tariffs," Wall Street Journal, May 31, 2002.

 

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