Lesson for Trump: 38 Americans work in industries using steel or aluminum for every worker making steel or aluminum
AEIdeas
The US maps above show: a) the share of each US county’s employment in steel- and aluminum-producing industries in 2016 (top map) and b) the share of each US county’s employment in steel- and aluminum-using industries (bottom map). The maps were featured in a recent New York Times article titled “How Trump’s Protectionism Could Backfire,” here’s a slice:
Tupelo fell hard for Donald Trump. The blue-collar enclave in northeastern Mississippi — birthplace of Elvis Presley and the American Family Association — was once home to a vibrant business in upholstered furniture. But as Chinese imports flooded in, the local economy buckled. There are fewer jobs in Tupelo today than there were at the millennium. Middle-income families are making almost 20 percent less, after inflation, than they did then. Mr. Trump’s offer to build a wall against Chinese imports was just what Tupeloans wanted to hear.
Republicans could not lose in this deep red enclave in the buckle of the Bible Belt. Still, in the 2016 election, Mr. Trump carried Lee County, where Tupelo sits, by a 38-percentage-point margin over Hillary Clinton — nine percentage points more than Mitt Romney’s lead over Barack Obama four years before. And yet it’s not working out great for the working men and women of Tupelo. Indeed, President Trump’s first big trade barrier — tariffs against steel and aluminum imports — is, again, threatening to undermine their livelihood.
For every job in Tupelo producing steel or aluminum, there are 200 jobs in industries that consume them that could be put at risk as tariffs push up the prices of these metals, according to research from Jacob Whiton and Mark Muro of the Brookings Institution. This is true across the country (see maps). The lesson the White House has yet to figure out is that the tariffs meant to protect the businesses that make these metals will end up hamstringing the industries that rely on them.
As Mercatus Center economist Veronique de Rugy pointed out in the New York Times earlier this month (“The Trump Tariffs Will Cost Americans Job“):
Mr. Trump will raise the cost of doing business in steel- and aluminum-consuming companies. In turn, it will make life much harder for the 6.5 million workers those industries employ. Many will lose their jobs — possibly more than the 170,000 workers currently employed in the steel and aluminum producing industries.
And that’s exactly what happened following President Bush’s steel tariffs in 2002, according to a study that found that steel-using industries lost 200,000 jobs, which was more than all the jobs in the steel industry itself at that time. Whether you look at jobs lost vs. jobs saved from tariffs, the costs to consumers per job saved by protectionism, or the costs to consumers vs. the benefits to protected producers, the math of protectionism always leads to the same conclusion: the country imposing protectionism is made worse off on net, and suffers from net job losses.
Mark,
What do you make of AEI Phil Gramm’s statement: “The effective way to deal with China’s steel and aluminum subsidies is to have all the world’s steel and aluminum producers jointly demand that Beijing end them, and then to enforce that demand with unified retaliation if necessary” (https://www.wsj.com/articles/trump-tariffs-and-the-protectionist-temptation-1521844770). Seems like he is standing up for the principle of truly free markets (i.e., no subsidies).
Jack
“The effective way to deal with China’s steel and aluminum subsidies is to have all the world’s steel and aluminum producers jointly demand that Beijing end them, and then to enforce that demand with unified retaliation if necessary”
I think it would be easier to herd cats.
I would say that the effective way to deal with China’s steel and aluminum subsidies is to thank them for the generous gift of foreign aid to the American people by providing us with low prices for major inputs that elevate our standard of living.
Subsidies of foreign produers = subsidies of American companies and consumers.
If they gave us the goods for free, that would be the best of all possible worlds. In the next best possible world, they subsidize the production of goods for Americans or sell us goods at below cost, which is form of generous foreign aid for the USA.
Mark,
I am aware of your view. My question was what do you make of AEI Phil Gramm’s statement? He comes from your organization. How can an AEI economist say what he said? In your experience, what is going on in the mind of a conservative economist that says what Phil Gramm said? My question is more along the lines of how you personally make sense of strange statements like this one from Phil Gramm that come from your own camp? He can’t be stupid or ignorant. In your mind, what is driving him to say what he said?
Just to clarify: AEI does not take organizational positions on any issue, and scholars and fellows are free to express their own opinions, which might often differ from other scholars and fellows. Further, I’m libertarian and Phil Gramm is probably more conservative, so there could always be a divergence of opinion on those political/philosophical differences. And there really is no “AEI camp” that might suggest some unified position on trade or any other issue. Scholars and fellows are all totally independent, many of us never even see each other or interact. In the case of Phil Gramm, he’s listed as a visiting scholar, and I’ve never met nor seen Phil at AEI. And there are no “department meetings” or any another organized interactions where scholars discuss issues and is aware of everybody else’s viewpoints. I really don’t pay much attention to statements like that one from Phil Gramm, and would not personally devote much time to speculate or personally try to make sense of something like that that Phil Gramm (or anybody else at AEI) said!
Mark,
So you are not even interested in (or unwilling to comment on) why Phil Gramm who, based on the opinion piece, seems solidly aware of the effects of tariffs and trade, would say such a thing? Why not? Seems like interaction with another opinion furthers everyone’s understanding of the issues.
I really have no idea what is driving Phil Gramm to say what he said… Please feel free to spectulate yourself. I certainly can’t be expeced to respond to the hundreds of comments that AEI scholars/fellows/economists make every day. It’s a full-time job just managing a blog and trying to do research and provide new content seven days a week, and I therefore barely have to time to even read most of what other AEI folks are writing/saying, etc., much less respond in writing, and try to speculate about what other consider to be strange statements…
Ok, that’s understandable.
It is just mind-boggling to me why Gramm says what he says since he has a PhD in economics and taught it for 12 years and applied it as a Senator in the real world. It would sure be nice if someone who knew what they were talking about could explain why a guy like that could go so far off the rails. For boneheads like me, it makes me wonder if I am missing something and Gramm knows something that I have not heard about.
Yes, I would like to see Mark Perry write an equal op-ed on the damage Chinese trade protectionism does to Chinese consumers and citizens.
And then demand that China end its protectionism or face global retaliation.
It should be obvious that tariffs and protectionism create economim damage to the country engaging in such legal plunder, and it doesn’t matter whether it’s the USA, China, Japan, Mexico, etc. The benefits of trade and the damage of protectionism aren’t specific to any individual country, that should be obvious and doesn’t require an op-ed….
I think everyone needs to take a chill pill. I believe what Trump is doing on so many fronts is just testing the old rules to find out what really works today.
In the era of big government, both here and in the EU, there have been countless lobbyist working for the NGOs or corporate masters that have written the rules that benefit them. I have to believe that the vast majority are now outdated or just wrong.
It is pretty obvious that you can’t get congress to change every little law so enter Trump to shake things up. I really believe there is a method to his maddness.
If the problem is that so many rules are poorly written and by lobbyists, then how is the solution to have more poorly written rules written by lobbyists?
The true solution is to tear them all up: unilateral free trade.
Have you visited the Confucius Institute on the George Mason campus?
Joe-
Your unsubtle ad hominems are childish. Grow up.
The only defense for Trump’s protectionism is that he sincerely believes he’s right, with Peter Navarro whispering reinforcing words into his ear every day. Trump’s believe in protectionism is on the record going back to the 80s. He’s a guy who can only see what’s right in front of him–i.e., saved jobs in steel and aluminum production–so he’s innately unable to see the downstream destruction caused by his tariff edicts. Even when the numbers prove that jobs have been lost by steel- and aluminum-consuming firms, and that consumer prices have increased, he will not put two and two together.
Announcement and details regarding the KORUS Agreement:
JOINT STATEMENT – Today, Ambassador Lighthizer and Minister Kim are pleased to announce that the United States and the Republic of Korea have reached an agreement in principle on the general terms of amendments and modifications to the United States-Republic of Korea Free Trade Agreement (KORUS FTA). The nations have also agreed on terms for a country exemption for the Republic of Korea from tariffs imposed on steel imports under Section 232 of the Trade Expansion Act of 1962 pursuant to Presidential Proclamation 9705, as amended. The arrangement with respect to steel imports is expected to take effect on May 1, 2018.
https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/joint-statement-united-states-trade
The New U.S. Trade Policy and National Security Outcomes with the Republic of Korea:
https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/march/new-us-trade-policy-and-national
Remembering Phil Gramm:
Ever wonder what Gramm did for 83 million dollars?
https://www.opensecrets.org/members-of-congress/summary?cid=N00005709&cycle=CAREER&type=I
As chairman of the Senate Banking Committee from 1995 through 2000, Gramm was Washington’s most prominent and outspoken champion of financial deregulation. He played a leading role in writing and pushing through Congress the 1999 repeal of the Depression-era Glass-Steagall Act, which separated commercial banks from Wall Street. He also inserted a key provision into the 2000 Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. Credit-default swaps took down AIG, which has cost the U.S. $150 billion thus far.
http://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877330,00.html
Senator Phil Gramm – Vice Chairman, UBS Investment Bank
Senator Phil Gramm joined UBS Investment Bank as Vice Chairman in December, 2002.
Gramm is certainly doing exceptional work at UBS:
Violation Tracker Parent Company Summary
Parent Company Name: UBS
Ownership Structure: publicly traded (ticker symbol UBS)
Headquartered in: Switzerland
Major Industry: financial services
Specific Industry: banking & securities
Penalty total since 2000: $4,980,317,403
Number of records: 38
UBS reads like a criminal syndicate:
interest rate benchmark manipulation, toxic securities abuses, tax violations, banking violation, investor protection violation, price-fixing or anti-competitive practices, on and on.
https://violationtracker.goodjobsfirst.org/prog.php?parent=ubs
Trump is just rattling the cage to get better trade deals – just like with South Korea. Don’t be a sucker, just chill, save your energy, enjoy the spectacle and watch the share market go up.
Trump train baby – WOOT WOOT !!
The Big Theft: ( and no one did anything about it )
Section 301 Report into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation
https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/section-301-report-chinas-acts
https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF