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The Pros and Cons of the New Steel and Aluminum Tariffs

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On March 8, President Trump signed two proclamations imposing tariffs on imported steel and aluminum, scheduled to take effect in 15 days. The measure levies a 25% tariff on imported steel and a 10% tariff on imported aluminum. Let’s take a look at some of the pros and cons of these tariffs.

Pros

They will bring back jobs – The Washington Post reported that some executives in the aluminum and steel industry have said they will begin hiring for jobs that pay $60,000 per year as soon as the paperwork is signed. And U.S. Steel has announced it will reopen a plant in Illinois, while Century Aluminum stated the tariffs could potentially create 300 new jobs in Kentucky.

They will restore our nation’s security – The CEO of U.S. Steel, David Burritt, said in the Wall Street Journal, “Our national and economic security is only as strong as our country’s ability to produce steel from beginning to end within our own geographic borders.” They hurt companies, workers, and consumers – Approximately 5.4 million workers in steel-consuming manufacturing sectors will be hurt by higher steel prices as a result of these measures. In addition, Goldman Sachs projects Ford and GM will both lose $1 billion each this year due to the tariffs. The higher material costs will also be passed on to consumers in the form of higher prices, acting as a punitive tax. They haven’t worked in the past – In 2002, the Bush administration imposed steel tariffs to protect the steel industry from specific competitors. The plan backfired, allowing producers to raise prices of domestic steel with no impact on employment. However, an estimated 200,000 workers lost their jobs in downstream industries in subsequent years – more workers than in the entire steel industry. They are simply not necessary – The U.S. steel industry is not dying. In fact, 70 percent of the steel used in the United States today is produced domestically. In addition, production levels have remained virtually the same over the past few decades; and since 2010, have actually increased. KPS Global is the industry-leading manufacturer of insulated panel systems, supplier of aftermarket parts and replacement equipment, and provider of seamless installation services. As a major user of both steel and aluminum, we will continue to monitor the tariff situation so that we can remain competitive. To learn more about KPS Global and the industries we serve, visit kpsglobal.com/industries-we-serve/.”>report by Secretary of Commerce Wilbur Ross also cites the need for maintaining an adequate domestic production of steel and aluminum for use in defense, aerospace, and infrastructure.

They help level the playing field – The New York Times reports that foreign producers of steel and aluminum often receive subsidies from their governments. These incentives serve to drive production up and prices down. Lower prices can be good for consumers, but bad for producers, who are sometimes simply forced out of business. Tariffs can help balance these foreign subsidies and protect American metal producers.

Cons

They hurt companies, workers, and consumers – Approximately 5.4 million workers in steel-consuming manufacturing sectors will be hurt by higher steel prices as a result of these measures. In addition, Goldman Sachs projects Ford and GM will both lose $1 billion each this year due to the tariffs. The higher material costs will also be passed on to consumers in the form of higher prices, acting as a punitive tax.

They haven’t worked in the past – In 2002, the Bush administration imposed steel tariffs to protect the steel industry from specific competitors. The plan backfired, allowing producers to raise prices of domestic steel with no impact on employment. However, an estimated 200,000 workers lost their jobs in downstream industries in subsequent years – more workers than in the entire steel industry.

They are simply not necessary – The U.S. steel industry is not dying. In fact, 70 percent of the steel used in the United States today is produced domestically. In addition, production levels have remained virtually the same over the past few decades; and since 2010, have actually increased.

KPS Global is the industry-leading manufacturer of insulated panel systems, supplier of aftermarket parts and replacement equipment, and provider of seamless installation services. As a major user of both steel and aluminum, we will continue to monitor the tariff situation so that we can remain competitive.

To learn more about KPS Global and the industries we serve, visit kpsglobal.com/industries/.

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