Just like his father, George W. Bush claims to be against higher taxes, but has no problem imposing additional taxes if he believes it is politically advantageous to do so. In the latest round of Bush tax hikes, the president this week announced an 8 to 30 percent tax increase on steel imports.
The U.S. steel industry is in a world of trouble. The last decade has seen a veritable shakeout with many firs going bankrupt. The basic problem is that U.S. steel companies are inefficient, begin unable to compete with foreign producers on either quality, quantity or price.
So on March 5, Bush announced a series of tariffs and quotas on steel imports that will go into effect on March 20. Here’s a look at the various tariffs on steel products:
|
Product
|
Tariff
|
| Tin mill steel |
30%
|
| Flat steel products |
30%
|
| Hot-rolled and cold-finished bar |
30%
|
| Carbon and alloy fittings and flanges |
13%
|
| Circular welded tubular products |
15%
|
| Stainless steel bar |
15%
|
| Stainless rod |
15%
|
| Stainless steel wire |
8%
|
| Rebar |
15%
|
| Slab steel |
30%* |
| * On all slab steel imports after the first 5.4 million tons |
|
The tariffs will hurt steel producers in Russia, Japan and Europe the most, as well as American consumers since the tariff is simply an extra tax on people who buy products made out of steel (such as automobiles). MSNBC cited a study estimating that the tariffs will cost the average family of four almost $300 per year. The tariffs are also likely to trigger a trade war between the United States and other steel producing nations.
Why did Bush impose the tariffs? For political reasons, of course. Bush pulled an upset victory in the 2000 election by beating Al Gore in West Virginia. Bush campaigned in West Virginia on promises to “protect” the steel industry. One of West Virginia’s largest employers is Weirton Steel. Weirton produces tin mill steel, so it is hardly surprising to see tin mill steel hit with a 30 percent tariff.
But will tariffs do much to save the steel industry? As the Detroit Free Press’s Tom Walsh pointed out back in December, tariffs don’t have a good track record. Walsh sites the example of Michigan company Optical Imaging Systems. OIS manufactured LCD screens for laptops, and in 1991 won an anti-dumping decisions that resulted in 62 percent tariffs being imposed on LCD screens imported from Japan.
OSI said this would let them compete on equal footing, but the actual result ended up putting OSI out of business. Faced with the prospect of paying such high prices for LCD screens, computer manufacturers simply moved their laptop assembly facilities outside of the United States. Thousands of people employed at assembling laptops lost their jobs, and OSI was out of business in 1998.
How much of this sort of “protection” can the U.S. economy stand?
Source:
Beware what steel tariffs may do to car makers. Tom Walsh, Detroit Free Press, December 18, 2001.
Bush warned off steel tariffs. The BBC, March 5, 2002.
Bush approves steel import tariffs. Associated Press, March 5, 2002.
Bush steel tariffs anger allies. The BBC, March 5, 2002.