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Some Truths about Tariffs

                                                 by Peter Hildebrandt

         When I attended a college back in the mid-1970s, some 75 miles south of Pittsburgh,
         I had a Pennsylvania housemate who easily paid for an entire year of college working
         alongside his dad in a steel mill each summer. Student loans were in their infancy as a
         payment method and college was ridiculously cheap compared to prices today.
         But still, a steel mill job also meant that you pretty much had it made – for life. I
         can’t remember anyone ever discussing what would happen if those jobs went away.
                                                                               Pittsburgh was Steelers
                                                                               country for a reason, and
                                                                               that is just how it was.
                                                                               Few perhaps could imagine
                                                                               many things we have in the
                                                                               economic world of today.

                                                                                 “American steel is a vastly improved
                                                                               industry,” admits  Professor Ned Hill,
                                                                               from Ohio  State University’s John
                                                                               Glenn  College of Public  Affairs.  Hill
                                                                               studies  economic  development and
                                                                               adds: “It  seems  to  me  that they  have
                                                                               established a competitive equilibrium.
                                                                                 1980s American steelmakers  needed
                                                                               some  10.1  man-hours  to  produce  a  ton
                                                  Illustration © Skypixel /  of steel. To produce the same now only
                                                                               takes  1.5  man-hours.  Super-efficient
              here is one thing that is certain,   between January 2017 and exactly one   mini mills using electric arc furnaces to
              the  name  of  Pittsburgh’s  NFL   year later.                   turn scrap metal into steel – as opposed
         Tteam clearly harkens back to        “Even before Trump mentioned the   to the only steel mills using coke and iron
         another time, another world. No mat-  tariff, the price of the benchmark U.S.-   ore in blast furnaces to craft steel from
         ter how much some of us may wish or   made hot-rolled steel had reached the   scratch – in some cases require only 0.5
         dream for a return for those days, they   highest level since  May 2011, accord-  man-hours to produce a ton of steel. All
         are not coming back. Between 1981 and   ing  to  S&P  Global  Platts. The  price   of these developments have transformed
         1989 Wire Rope News ran a series of ar-  surged even higher on the tariff news.”  an industry employing, at its peak in
         ticles  about  the  battles  over  imported   “We finished 2017 in a good position,”   1953, 650,000 workers, into one with ap-
         steel, the flooding of the market, rises in   says David Burritt, U.S. Steel CEO.   proximately 143,000 people today.
         prices, and ideas about what to do about   “We look forward to 2018 and are seeing   According  to a  recent  piece  in  the
         those things. Even then, perhaps few re-  increased  demand  from  our  customers   New York Times, here’s one idea of
         alized or understood how globalized the   and have rescheduled some projects to   what we need to know.
         world economy would soon become.   ensure that we can make enough steel   First of all, just what is a tariff? A tar-
           Fast forward to 2018.  President   to support our customers’ need.”  iff, simply put is a tax placed on some
         Trump has announced in March of      Still, steel makers complain they are   particular  class of  imported goods,  ac-
         2018  that his administration would   victims  of  unfair  foreign  competition,   cording to Neil Irwin, with the NYT.
         impose a 25 percent tariff on imported   as Wiseman points out. And the indus-  “If the Trump administration follows
         steel and a 10 percent tariff on import-  try isn’t doing as bad as their press re-  through on the president’s comments
         ed aluminum. Paul Wiseman of The   leases say it is, according to Bradford   from earlier in March, a company bring-
         Associated Press calls now an odd time   Research president, Charles Bradford.   ing $100,000 of steel made in Canada
         to offer special protection for the U.S.   “Any time  world economic  growth  is   into  the  United  States  would  have  to
         Steel industry. This move was done for   over three percent, the steel industry   pay $25,000 to the government, effec-
         the supposed reason that other coun-  usually does OK.”               tively increasing its price. Tariffs are
         tries’ trade practices jeopardize Ameri-  The International Monetary Fund re-  typically a governmental tool to protect
         can  national security  by undermining   ports the global economy grew some 3.7   domestic industries and raise revenue.
         domestic production.               percent last year; it expects to grow 3.9   Could there be an “if” to this decision?
           However  the  industry  earned  more   percent in 2018. The United States econ-  The president made the announcement
         than 2.8 billion dollars last year –   omy grew 2.3 percent last year. This,           continued on page 10
         that’s up from $714 million dollars last   a 1.5 percent improvement over 2016.
         year and a loss  in  2015, according  to   Other issues to factor in are Texas and   Editor: This article was written in March of this year,
         the  Commerce Department. Also,  the   Florida’s rebuilding efforts in the wake of   and was current as of press time in early April. The
                                                                               situation and some details about the tariff could have
         industry added more than 8,000 jobs   last year’s devastating hurricanes.   changed by the time you are reading this article.
         8      Wire Rope News & Sling Technology   April 2018
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