In an interview with MSNBC last Thursday, new Commerce Secretary Gina Raimondo spoke highly of the “national security” tariffs that President Trump placed on steel and aluminum imports in 2018 under Section 232 of the Trade Expansion Act of 1962. According to Secretary Raimondo, “[t]he data show that those tariffs have been effective.” As my colleague Simon Lester noted at the time, it’s not entirely clear whether Raimondo’s opinion was specific to China or the Section 232 tariffs more broadly, and she amplified the confusion by immediately following her remark with a note that the Biden administration is still reviewing the tariffs before deciding what to do with them. Nevertheless, there’s little to suggest that the tariffs have been “effective” — even by tariff supporters’ own benchmarks.
In a new paper, my colleague Inu Manak and I address the numerous legal problems raised by Section 232 — problems no one really noticed until Trump started abusing it with his metals tariffs and other actions — and explain why the law should be repealed or, at least, significantly reformed. I also detailed the main economic arguments against the Section 232 tariffs in a recent policy analysis on manufacturing and national security, showing how the tariffs served as “a powerful example of the perils of American security nationalism”:
Numerous studies have documented the tariffs’ high economic costs for U.S. consumers (particularly manufacturing firms). In particular, the tariffs caused higher steel prices that in turn hurt other U.S. manufacturers in terms of higher input costs, lower exports, and lost competitiveness at home and abroad; created an opaque, costly, and uncertain “exclusion” bureaucracy, under which more than 100,000 requests have been filed by U.S. manufacturers seeking relief; resulted in approximately 75,000 fewer manufacturing jobs than would have otherwise existed in the absence of the tariffs; depressed global demand for steel (thereby dampening prices); bred global market uncertainty, which hurt investment in manufacturing; and caused numerous U.S. trading partners to retaliate against American exporters.
At the same time, the steel tariffs were found to have a minimal impact on U.S. steelworker jobs and to do nothing to address global steel overcapacity—the primary long‐term driver of the U.S. steel industry’s weakened financial position in 2018. Given these and other market dynamics (e.g., steelmakers bringing back inefficient capacity to capture rents and subsequently flooding the U.S. market), industry stocks tanked in late 2018 and early 2019, and steel companies were actually laying off workers and curtailing investments by the end of 2019. In extending the tariffs to downstream “derivative” products in early 2020, the Trump administration tacitly admitted that the steel tariffs had not achieved their primary goal of increasing and stabilizing the industry’s capacity utilization. As one Los Angeles Times story put it, “Trump’s steel tariffs were supposed to save the industry. They made things worse.”
As has been widely documented here and elsewhere, the tariffs’ harms for U.S. consumers — particularly domestic manufacturers that consume steel and aluminum — are hardly in doubt, and skyrocketing prices are currently undermining the U.S. manufacturing recovery. However, Raimondo’s comments indicate that the Biden administration might not care about the tariffs’ obvious consumer harms when determining their efficacy. It’s thus worthwhile to expand upon that second paragraph above, which generally mirrors the very standards for success that tariff supporters used when the measures were first put in place. For example, the Trump administration identified three main goals in the Commerce Department’s Section 232 report on steel imports: (1) to boost domestic producers’ capacity utilization above 80% — the level reportedly “necessary to sustain adequate profitability and continued capital investment, research and development, and workforce enhancement” — for an extended duration; (2) by extension, to produce a “a healthy and competitive U.S. industry” in terms of employment, production, and investment; and (3) to reduce the “global excess capacity” — particularly in China — that was allegedly a driving force behind the steel industry’s recent troubles.