The Financial Times reports that the Trump administration is considering steel tariffs:
The US has set the stage for a global showdown over steel, launching a national security investigation that could lead to sweeping tariffs on steel imports in what would be the first significant act of economic protectionism by President Donald Trump.
The decision to use a 1962 law allowing the US government to limit imports that threaten its security readiness is intended to deliver on Mr Trump’s campaign promises to bolster heavy industry and “put new American steel into the spine of this country”, officials said on Thursday.
A few observations:
1. Congress erred in delegating to the executive branch the power to set national security tariffs. Almost any industry could be deemed essential for “national security”.
2. The US steel industry currently produces about 80 million tons per year. That’s more than enough to meet our essential military needs. And this doesn’t even account for the fact that steel production could be increased, as we are not operating at capacity. Yes, it might take a bit of time to bring mothballed plants back online, but as the following quotation suggests, new weapons now take far longer to develop than they did back in WWII:
Civilian manufacturing capacity is now ALMOST ENTIRELY USELESS for defense purposes. Whereas in WWII, auto assembly lines could be used to make planes & tanks, and Singer made guns instead of sewing machines… Now all but the most basic defense products (personal firearms, sewing of uniforms, etc) must be made by specialized expert-firms. Super-weapons such as the F-22/F-35, M1A3 Abrams (it’s under development now), and whatever we make when we finally field a next-generation artillery piece (cancelling the Crusader was a mistake, btw) require such a specialized knowledge-base & facilities, that they MUST be made by a dedicated defense industry – something we have (on a best-in-the-world level). Re-purposing a factory that built 2-ton SUVs to build 70-ton tanks just isn’t happening. Even if it could, how much experience does your average auto-worker have in assembling uranium-ceramic-steel-composite armor properly, so as to maintain it’s ability to take 125mm KE hits?
A final point on this issue, is that modern war moves to fast to ‘develop and manufacture new products after the fact, using civilian industries’. It’s a ‘run what ya brung’ sort of affair
And this doesn’t even account for the fact that the US would likely have access to steel produced in friendly countries such as Canada, Mexico, Brazil, Japan and Germany. Sure, one could construct scenarios where some of that steel is cut off in a war (i.e., Japanese exports are disrupted by a war with China, or German exports in a war with Russia), but unless the US is fighting the entire world at once, we’d surely have access to at least some markets. And if steel imports really were cut off, where would we get our iron ore? Today we don’t need much iron because of our use of scrap metal. But if we stopped building cars during a war, then far less scrap metal would be available.
This also fails to account for the fact that warfare in the modern world tends to be asymmetric. The threat of nuclear annihilation means that we fight small countries, not large nuclear powers.
The development of missile technology tends to make steel-intensive weapons (such as ships and tanks) more of a “sitting duck” than in the old days. I recall that a single Argentine missile took out a British destroyer in the Falklands War–and that was way back in 1983. Think about today’s cruise missiles, and also consider that the sort of powerful adversary that would require the US to have a massive steel industry would be far more militarily advanced than Argentina in 1983. I’m not expert on modern weapons, but I’d wager that in today’s warfare a big steel industry is less important than back in WWII.
3. One possibility is that the national security argument is simply being used as an excuse to save jobs in the steel industry. As an analogy, recall that when Trump campaigned for President he promised to ban Muslim immigration. When Rudy Giuliani told him that this was a legally dubious proposal, Trump asked for a version of the plan that would be accepted by the courts. This led to the recent dispute over the ban on immigration from seven (later six) majority Muslim countries.
I don’t have strong views either way on whether Trump’s immigration ban was legal. But I will say that the legal argument for protecting the US steel industry on national security grounds seems far less plausible than the claim that the immigration ban protects national security (and I’m dubious of even that claim.) So you might expect the courts to question the steel tariffs on exactly the same grounds they challenged the immigration ban—Trump is on the record favoring this sort of action on entirely different grounds—jobs. On the other hand, courts have tended to show more deference to the government on economic regulation than on civil rights/equal protection issues, so I’m not making any predictions here.
4. It is likely that a suitably high steel tariff could save some jobs in the US steel industry. However, it seems much less likely that this would serve Trump’s broader goals of restoring jobs in manufacturing. Tariffs protect industries by driving up the price of the commodity being imported. But if steel prices rise, then this puts other American manufacturers (cars, white goods, etc.) at a competitive disadvantage to imports. Mexican firms making cars or washing machines would be able to buy steel more cheaply than American manufacturers, and this would cost jobs in other sectors of the US economy. The net effect on the total number of jobs in manufacturing is likely to be pretty trivial, and could be either positive or negative.
5. Policies based on metaphors that romanticize and/or anthropomorphize the economy are unlikely to be wise:
The decision to use a 1962 law allowing the US government to limit imports that threaten its security readiness is intended to deliver on Mr Trump’s campaign promises to bolster heavy industry and “put new American steel into the spine of this country”, officials said on Thursday.
Sorry folks, those days are long gone:
READER COMMENTS
Luke J
Apr 21 2017 at 4:11pm
For additional background, steel imports have for years been subject to additional requirements and not entirely separate from national security. See 19 CFR 360.101-108.
LD Bottorff
Apr 21 2017 at 4:33pm
As a conservative, I am much more of a hawk than you and the other bloggers on this page. However, I think that putting high tariffs on steel will weaken our economy and make it harder to win wars. A sound economy and free trade will make us a stronger nation, more able to avoid war and more likely to win any we are forced into.
Steel tariffs will make us weaker.
Your Point 2 is especially good.
Gordon
Apr 21 2017 at 5:46pm
Wouldn’t a higher cost for steel also make it harder to attract investors for Trump’s infrastructure plan? And if I recall correctly you pointed out not long ago that half the coal produced in the US goes to China to support its steel industry.
MikeP
Apr 21 2017 at 5:49pm
This led to the recent dispute over the ban on immigration from seven (later six) majority Muslim countries.
Can we please get rid of this meme? These seven countries weren’t drawn out of a hat of majority Muslim countries. They are seven countries that are either hotbeds of anti-western terrorism or Iran.
Can we call them something like, “six (later five) countries at high risk for exporting terrorism, along with Iran”? That is much more descriptive of the fundamentals in play.
As much as I detest Trump and as abhorrent as I find immigration restrictions, his executive order should be read at face value in the context of what is legal for a president and executive branch to do. That a federal judge used statements made during an election campaign as demonstration of the motive for the ban is beyond the pale and well beyond any concept of rule of law. An executive order was signed and delivered to administrative agencies. Its legality should be evaluated based on the words in the order and the legitimate powers of the agencies tasked with its execution, not on the basis of anything said prior to election by a bald-faced liar seeking the votes of millions of idiots looking for a demagogue.
Scott Sumner
Apr 21 2017 at 6:26pm
Thanks Luke.
Gordon, Good point.
Mike, How many of the 9/11 terrorists came from those 6 countries? How many of the Boston Marathon bombers? In the past 20 years, how many Americans have been killed by terrorists from those 6 countries, in terrorist acts committed in the US?
Zero?
Let’s be honest, immigrants from Saudi Arabia are far more likely to commit terrorists acts in the US than immigrants from Iran. Whatever this is about, it’s not about “protecting us from terrorism”.
As far as the legal issues involved, I don’t have a strong opinion either way.
MikeP
Apr 21 2017 at 6:59pm
Indeed, immigrants from Saudi Arabia or Egypt are far more likely to commit terrorist acts in the US.
And yet those countries are not on the list.
Noting that there is reasonable cause to ban immigrants from more Muslim countries than Trump included is actually a very strong argument that the ban is not about Muslims. Right?
The common element of the banned countries is that background checks supplied by their governments cannot be trusted, either because significant portions of the countries are under terrorist control, or because the governments themselves are not to be trusted. Indeed, the ban on Iraq was lifted partly because they improved their internal vetting.
The ban may not be effective. It may not be as effective as banning immigrants from Saudi Arabia. But it has some rational basis, though I do not know enough law to know whether it is a legitimate rational basis. And it is definitely not a Muslim ban, as evidenced by all the countries you could name that aren’t on it.
Daniel Klein
Apr 21 2017 at 7:07pm
Thanks for a valuable post, Scott. Just a side comment:
If the Trump administration wants to firm up the spine of this country, I suggest they put in more liberty and genuine liberalism.
Mark Bahner
Apr 21 2017 at 7:39pm
The overwhelming majority of coal produced in the U.S. goes to U.S. coal-fired utility boilers.
Kevin Dick
Apr 21 2017 at 11:33pm
Yet another example of why a constitutional limit on the maximum time of effect of any federal law (or better yet, at any level of government) would be useful. Otherwise, we accumulate so much cruft that there’s a pretense for almost anything.
Jon Murphy
Apr 22 2017 at 10:34am
Question: if the concern is “national defense,” then why doesn’t the government stockpile steel, rather than compelling Americans to pay more via tariff?
MikeP
Apr 22 2017 at 11:13am
Ooh, a strategic steel reserve.
If you don’t mind, I’m going to forward your name to Peter Navarro. Someone with your vision and imagination can go far on Trump’s economic team.
Jon Murphy
Apr 22 2017 at 12:37pm
@MikeP
But it’s Navarro who wants the tariffs…
What I am saying is, like Scott Sumner said, this isn’t about national defense.
MikeP
Apr 22 2017 at 1:20pm
Do they want the tariffs, or do they want the jobs?
I concur, this clearly isn’t about national defense. But having US plants churn out steel that will just be stored will certainly promote steel jobs while collaterally raising the price of steel worldwide. The effects are very similar to a tariff.
The operative question in judging Trump is always how words or actions play to his base. Are tariffs being sold to his base as a way to support US jobs? Or are tariffs being sold to his base as a way to stick it to foreigners?
Answering that question will tell us whether they would like idea of a strategic steel reserve or whether they think it will just get in the way of showing how tough they are on China.
Jon Murphy
Apr 22 2017 at 2:30pm
@MikeP-
“Are tariffs being sold to his base as a way to support US jobs? Or are tariffs being sold to his base as a way to stick it to foreigners?”
If that’s the question, then why even bring up the national security argument at all?
MikeP
Apr 22 2017 at 3:07pm
Because the legislation being used explicitly requires a national security justification.
Matthew Waters
Apr 22 2017 at 10:40pm
“Because the legislation being used explicitly requires a national security justification.”
This brings up a similar issue as the Muslim ban.
If the Trump administration tells the base “we’re doing this because of X” but the constitution/legislation says “you can only do that because of Y,” should courts believe his administrations is doing it because of Y and not X?
I just don’t see a “national security” tariff holding up with no honest attempt to tie tariffs to a true national security concern. If Trump wants tariffs to supposedly protect jobs or stick it to foreigners, then he is free to ask Congress to legislate such tariffs. He’s not free to use a national security law for non-national-security reasons.
R Schadler
Apr 24 2017 at 12:04pm
Please: It makes no sense to advocate “rule of law” and then fail to distinguish between acting illegally and simply making a bad decision.
1. Do district court judges have a role in second-guessing the executive branch’s judgments about visa policy vis-a-vis five countries? Does the Constitution or legislation grant them this power? Very, very doubtful.
That said: it is, at best, a marginal matter. And it may even be a counterproductive decision. But it belongs in the executive branch. If Congress wants to circumscribe this power, it should pass a law.
(One might even think that judges who egregious claim powers they do not have are violating their oath to uphold the Constitution.)
2. Regarding steel. The law should be changed. The role of steel in national defense has changed significantly. Very likely Trump is doing this for political reasons. If criticized sufficiently, it be politically advantageous to reverse this decision. But either decision is legal.
Thaomas
Apr 24 2017 at 6:09pm
@ MikeP
Visas are issued by USG officials, not the governments of the the source countries. Taking the “Muslim ban” at face value as an anti-terorism measure is exactly what it was impossible for judges to do.
MikeP
Apr 24 2017 at 8:04pm
Visas are issued by USG officials, not the governments of the the source countries.
…based on significant information supplied by the source countries.
Trump claims he is trying to implement extreme vetting. If one of the principle mechanisms for vetting residents from most every other country in the world cannot be trusted from six or seven particular countries, then it is not irrational to order a suspension of new visas for such residents until suitable alternatives can be developed.
Given the immigration law involved, courts face an extremely high burden to prove that the executive branch is overstepping its bounds. I do not know enough case law to judge whether the courts can overrule the executive order’s stated national security rationale: At least that is a valid question for the court to ask.
But it is absolutely walking off the reservation for a court to claim that, because Trump said something during his presidential campaign or Giuliani said something on TV at some other time, the plain text of an executive order doesn’t mean what the plain text of the executive order says.
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