Despite calling his predecessor the worst president America ever had, President Joe Biden has copied or maintained many of his policies. Be it plagiarism of the Made in America initiative or Abraham Accords in the Middle East, the Biden administration is conceding that a lot of former President Donald Trump’s measures may not have been liked but they were effective. The latest mechanism that 46 will either sustain or expand upon is steel tariffs. This protectionist scheme has been prevalent in the economic doctrines of past Republican and Democratic White House occupants. So, what is the real steel deal moving forward?
Tariffs in the Age of Bidenomics
Newsmax, Bloomberg, and the well-known newspaper in Washington are reporting that Biden is unlikely to scrap the metal import tax for national security and infrastructure reasons. He may even use them to his advantage to advance his climate change agenda. According to the news outlets, administration officials will continue to utilize the 25% levy on steel and 10% penalty on aluminum as a leveraging tool in negotiations with China. Commerce Secretary Gina Raimondo conceded that the tariffs "helped save American jobs" in the industries, while United Steelworkers Union President Tom Conway believes Beijing is “not going to roll back capacity just because you ask them to."
Here’s the Steel Deal on Tariffs
When Trump initially proposed steel tariffs, the purpose was to resuscitate a dying industry in the name of national security. Thanks to cheap steel production across the globe, the sector was facing a supply glut, particularly from China. Since they were enacted, steel prices have climbed 56%. Over the last year, steel prices have soared approximately 200% amid pandemic-induced demand.
The move had impacted multiple steel-consuming industries and companies. From layoffs to the suspension of operations, a long list of companies had been negatively impacted as firms and consumers were forced to pay approximately $900,000 for every steel job created or saved by the tariffs.
Today, the United States is struggling with soaring steel prices ($1,400) and inventory limitations. Industry observers are warning that if Biden's two-part multi-trillion-dollar infrastructure spending bill is approved, it will only exacerbate the problem of spiking domestic steel prices, production, and availability.
Another factor that is not much talked about is the global shipping container shortage. With international demand for everything under the sun strengthening simultaneously, there are not enough shipping containers to keep up with exports, leading to a premium on shipments. While manufacturers could produce more of these ships, the cost would be exorbitant due to soaring steel prices.
The situation could worsen in the coming months as a new S&P Global Platts Steel Markets North America (SMNA) poll found that half of the industry respondents anticipate prices to remain high for the next six months. Ultimately, in the grand scheme of things, the tariffs and current market conditions make the United States the high-cost producer.
The Riveting Case Against Steel Tariffs
When the previous administration was laying the groundwork for steel tariffs and pleasing an industry seeking special privileges, Liberty Nation reported on what has been the primary cause of the sector's decline. The conclusion among economists had been that technology was the driving force as steel businesses worldwide took advantage of electric arc furnaces.
"These allow mini-mills to turn scrap metal into the element without having to produce steel from scratch – tossing iron ore and coking coal into blast furnaces. This method also takes very little time to achieve.
“For decades, it took more than ten man-hours to produce a single ton of steel. Under current conditions, 90 man-minutes is all that is needed. In other mini-mills, a half-a-man-hour is required to create a ton of the commodity. Simply put: steel mills are now more efficient than ever before."
An example of this was an Austrian plant that had been erected in 2017. The facility possessed only 14 employees to produce 500,000 tons of steel wire per year. Forty years earlier, this would have required about 1,000 workers.
The other argument in favor of steel tariffs is the concern over cheap imports. But this benefits the U.S. market because it is more affordable for the private sector to consume, allowing the cost of goods and services not to fall victim to stealth inflation. The demand for jobs would, in theory, witness a transition from steel into other industries that manufacture products with the component. And, on a more technical level, the foreign capital surplus increases, providing an abundance of opportunities at home.
Bidenomics: More of the Same?
It has been just a few months since President Biden was inaugurated, and his vision for the country – economically and otherwise – is neither unique nor inspiring. Bidenomics is merely more of the same of what Americans have endured over the last 90 years, whether it is channeling the spirit of former President Franklin Delano Roosevelt or engaging in a five-finger discount of America First economics. But this big government plagiarism formula will only result in emulating the Jimmy Carter days: stagflation.
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Read more from Andrew Moran.
