Opinion: Trump’s steel and aluminum tariffs

There are a couple of important economic lessons that the American people should learn. I’m going to title one “the seen and unseen” and the other “narrow well-defined large benefits versus widely dispersed small costs.” These lessons are applicable to a wide range of government behavior, but let’s look at just two examples.

Last week, President Donald Trump enacted high tariffs on imports of steel and aluminum. Why in the world would the U.S. steel and aluminum industries press the president to levy heavy tariffs? The answer is simple. Reducing the amounts of steel and aluminum that hit our shores enables American producers to charge higher prices. Thus, U.S. steel and aluminum producers will earn higher profits, hire more workers and pay them higher wages. They are the visible beneficiaries of Trump’s tariffs.

But when the government creates a benefit for one American, it is a virtual guarantee that it will come at the expense of another American — an unseen victim. The victims of steel and aluminum tariffs are the companies that use steel and aluminum. Faced with higher input costs, they become less competitive on the world market. For example, companies such as John Deere may respond to higher steel prices by purchasing their parts in the international market rather than in the U.S. To become more competitive in the world market, some firms may move their production facilities to foreign countries that do not have tariffs on foreign steel and aluminum. Studies by both the Peterson Institute for International Economics and the Consuming Industries Trade Action Coalition show that steel-using industries — such as the U.S. auto industry, its suppliers and manufacturers of heavy construction equipment — were harmed by tariffs on steel enacted by George W. Bush.

Politicians love having seen beneficiaries and unseen victims. The reason is quite simple. In the cases of the steel and aluminum industries, company executives will know whom to give political campaign contributions. Workers in those industries will know for whom to cast their votes. The people in the steel- and aluminum-using industries may not know whom to blame for declining profits, lack of competitiveness and job loss.

Then there’s the phenomenon of narrow well-defined large benefits versus widely dispersed small costs. A good example can be found in the sugar industry. Sugar producers lobby Congress to place restrictions on the importation of foreign sugar through tariffs and quotas. Those import restrictions force Americans to pay up to three times the world price for sugar. A report by the U.S. Government Accountability Office estimated that Americans pay an extra $2 billion a year because of sugar tariffs and quotas. Plus, taxpayers will be forced to pay more than $2 billion over the next 10 years to buy and store excess sugar produced because of higher prices. Another way to look at the cost side is that tens of millions of American families are forced to pay a little bit more, maybe $20, for the sugar we use every year.

Even if the people knew what the politicians are doing, it wouldn’t be worth the cost of trying to unseat a legislator whose vote cost them $20 a year. Politicians know that they won’t bear a cost from sugar consumers. But they would pay a political cost from the sugar industry if they didn’t vote for tariffs. So they put it to consumers — but what else is new?

Writes for Creators Syndicate.

Reader Comments ...

Next Up in Opinion

Opinion: It hasn’t always been like this

One of the unavoidable tragedies of youth is the temptation to think that what is seen today has always been. Nowhere is this more noticeable than in our responses to the recent Parkland, Florida, massacre. Part of the responses to those murders are calls to raise the age to purchase a gun and to have more thorough background checks — in a word...
Palm Beach Post editorial cartoon for Tuesday March 20
Palm Beach Post editorial cartoon for Tuesday March 20

POINT OF VIEW: Baker Act needed now more than ever

We are living at a time when urgent mental health evaluation is needed more than ever. The Florida Baker Act was created to provide a route of monitored observation, assessment and treatment for those suffering a mental illness and who are at high risk of self-harm, harm to others or even self-neglect. Commonly known as the Baker Act, it was named...
Letters: Nosy, aka involved, parents can help keep kids safe

Nosy parents can help keep kids safe The recent BallenIsles attack should be a wake-up call for parents. (“Boy dead; woman, boy injured in stabbing in BallenIsles,” March 12). In this busy technological age, parents should be vigilant about what their kids watch on TV as well as how they use their phones and computers. Sometimes parents...
Opinion: “Militant” anti-gay activist seeks to divide Catholic flock

The music of Dan Schutte, a composer of Catholic hymns, is a staple at Visitation Parish in the heart of Kansas City. The man himself is less welcome. The renowned composer has been disinvited from a scheduled April 28 concert. That alone is shocking, as the lyrical, soothing tones of his work are heard in churches nationwide. The reasons for his disinvitation...
More Stories