Why a Trade War over Steel and Aluminum?

Subsidized Steel from China is behind the Trade War. Trump's tariffs are against our main trading partners not just the Chinese who are putting U.S. steel companies out of business.

Imagine listening on the radio to a football game between the Trump team and the Foreign team.  Imagine that the announcers don’t name the players or describe the action, they just relate what happens one play at a time – “the quarterback throws the ball to a receiver who is tackled at the 22 yard line.” The play-by-play announcer then reads a short tweet issued by coach Trump and a tweet by a random Foreign leader. The color announcer follows by repeating one sentence statements by two random members of a group of former assistant coaches sitting nearby in the stands. Sounds ridiculous, but this is essentially what you get in a newspaper or internet story about the trade war over steel and aluminum imports. Politics as an empty game.

The real story the media won’t tell you is a lot more interesting. Since 2000, China has binged on steel and aluminum factories, increasing its production from 124 million tons to 800 million tons in 2015. Since every other industrialized nation already had a steel industry, there is now an estimated 700 million tons of global overcapacity in steel. In a classic case of what I have called managed trade, the Chinese government subsidizes its steel firms with low cost loans, subsidies on use of energy, free land for new facilities, and state-run unions that discourage workers from demanding higher wages.

Flooding the World with Cheap Steel   These subsidies allow Chinese firms to sell steel more cheaply than any other country, seizing market share in many nations and driving other companies out of business. In the U.S., many steel factories have closed and thousands of well-paid factory workers have been laid off. Last year, the European Union imposed tariffs of up to 28% on 20 types of Chinese steel products to try and protect European steel producers.

The threat to U.S. firms and workers is growing. Together, U.S. steel companies lost $1.3 billion in 2013 and that grew to $1.4 billion in just the fourth quarter of 2015. The unfair competition from China led to the loss of 14,000 jobs in the steel industry from January 2015 through December 2016, along with twice as many jobs in related support industries. This trade war has real casualties.

The Aluminum Disaster   The problem in the aluminum industry is even more dramatic. The Chinese have increased their aluminum production from 2.2 million tons in 2000 to 31.2 million tons in 2016, driving world prices down 39%. Since 2000, 18 of the 23 aluminum smelters in the U.S. have closed and only two are working at full capacity.

Somehow, Trump has responded to this ongoing trade war over steel and aluminum by placing tariffs on all countries exporting these products into the U.S. rather than leading an international effort to restore balance to the world’s steel and aluminum industries. His unilateral, shotgun blasts of tariffs are what offend European and Canadian leaders, not his concerns about the steel and aluminum industry.

Did You Know This?   Have you read any of these facts and figures in newspaper or web articles? Sure it is fun to just write about Trump and his infantile rants, but the mainstream media is not informing the public about real issues – not the Boston Globe or the Boston Herald, not MSNBC or Fox News. Our Democracy suffers – seek alternative sources of information.

 

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