President Trump’s recently announced steel and aluminum tariffs now form the foundation for an economy-wide industrial policy that will enable the White House to pick tariff-avoiding winners and tariff-paying losers. By selecting steel and aluminum, basic metals for an almost-endless list of firms and industries, and by giving the tariff program a national defense rationale, the White House artfully made Secretary of Commerce Wilbur Ross America’s industrial policy czar.
The mechanism by which these winners and losers are to be determined was described in a March 19 Federal Register notice bearing this ponderous title: “Requirements for Submissions Requesting Exclusions From the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel Into the United States and Adjusting Imports of Aluminum Into the United States; and the Filing of Objections to Submitted Exclusion Requests for Steel and Aluminum.”
The reach of the proclaimed policy extends far beyond the two specific industries Trump seeks to protect. As others have pointed out, there are about 6.5 million American workers currently employed in aluminum- and steel-using industries, versus only about 165,000 producing the two products.
Despite the administration’s claims that the tariffs are essential to protect an industry that is essential for national defense, only 3 percent of the output of the two affected industries currently goes toward that purpose.
As it turns out, 6.5 million U.S. workers now face a cloudier future, thanks to the impact the tariffs will have on their jobs by making the cost of doing business higher for their employers.
But those same workers can take solace and seek balm in Washington. They just need to encourage their employers to follow the steel and aluminum industries’ lead: Redirect some focus away from doing business in order to petition our government for relief. But where does that end?
Generally speaking, economists and other freedom-lovers who oppose tariffs do so because of the costs imposed on all consumers taken together. Tariffs interfere with the enormous gains from trade that we all enjoy and blunt incentives to specialize and produce the things that we can produce best and most simply. In short, they make the average citizen poorer.
That’s problematic enough. But when a tariff program is administered by politicians who can pick industrial winners—which also means picking losers by omission—the potential costs to the economy become even more crippling. We pay higher prices for consumer goods, and get less of them. And we get a politically entangled, less-vibrant economy and a sad case of economic hardening of the arteries.
But while all this seems bad enough, the program also allows Trump to decide which countries will be winners and losers, since he has the power to lower the tariffs for those that he favors. It is highly likely that the economic gains from regulatory and tax reform will be more than offset by losses from tariff and industrial policy.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
