Steel is the lifeblood of industrialized nations: the alloy is a key component in buildings, cars, railroads, ships, solar panels, and wind turbines. In 2017, the US steel industry accounted for more than $520 billion in economic output, generated $56 billion in federal, state, and local taxes, and supported nearly two million jobs. Given this mammoth impact on the economy, it’s only natural that policymakers work to support and encourage this vital industry. The Trump administration took this step in 2018 by implementing tariffs under Section 232 of the 1962 Trade Act, which have so far been upheld by the Biden Administration. Over the past three years, these tariffs have succeeded in helping to increase the competitiveness of the US steel industry, bolstered national security, and benefited the US economy, and for these reasons ought to remain in place for the near future.
In 2017, the state of the global steel industry was dismal. There was – and still is – a massive supply overcapacity spurned by noncompetitive and often illegal subsidies provided by several countries, but particularly China, to local steel industries that are largely state-supported or state-owned. These subsidies take the form of tax breaks, loans, equity infusions, and even state-led reorganizations designed to boost production at firms that would otherwise be financially untenable.
Subsidies encourage manufacturers to produce steel in excess and export it abroad at prices that American firms cannot beat because the US government does not subsidize its steel production to nearly the same degree. In fact, the oversupply has resulted in at least 64 anti-dumping and countervailing duty orders against China alone through the World Trade Organization, but this did little to discourage anticompetitive practices in the steel industry.
This has been a major threat to American national security, as state-subsidized competition in the steel industry is driving American steelmakers out of business with prices they cannot compete against, diminishing US manufacturing capacity in the process. From the resultant weakening of domestic production, the US steel supply will become dependent on global supply chains, making us more vulnerable to fluctuations and shortages and more at-risk to market manipulation. Plus, without domestic steel manufacturing, our nation’s civil and defense infrastructure will become wholly reliant on foreign nations, who may exert pressure through steel prices to target and harm Americans to extract political concessions. Further, there is also a direct threat to millions of American jobs — with the potential to devastate communities where steel manufacturing is pivotal to the local economy.
This steel overcapacity has also been massively detrimental to our global climate. In China, increased CO2 emissions have tracked with increased steel production, where plants are largely powered by coal and are subject to few, if any, environmental standards. By contrast, through a combination of both regulations and industry practice, the US steel industry is the cleanest in the world, with lower CO2 emissions per ton and less energy intensity overall than any of the seven largest steel-producing countries. American steel producers, however, cannot keep up against foreign competitors not beholden to these environmental practices, which leaves the world further at risk of climate disaster.
It is for these reasons that the US government must work to strengthen our local steel industry. Fortunately, the Section 232 tariffs have been successful in doing just that.
According to research from the Economic Policy Institute, following the implementation of Section 232 tariffs, US steel firms accounted for more than $15.7 billion in domestic investments, which is set to create thousands of new jobs. The tariffs had an immediate effect too: in their first year, US steel imports dropped by 27%. There was also a negligible effect on prices paid by US consumers downstream in the supply chain, thus making it clear that the benefits of the steel tariffs have not translated into any costly tradeoffs for the American people.
Despite these successes, there has recently been pressure on the Biden Administration from the European Union to lift these steel tariffs. Tariff opponents and the EU have argued that they have not directly stopped China’s practices contributing to global overcapacity, which they say renders them redundant. But as has been demonstrated above, Section 232 tariffs are far from redundant, and the support they have given to workers and their communities through increased investment in manufacturing would all crumble should the tariffs be lifted. Moreover, any changes in tariff policy by the US will need to be carefully constructed with trading partners to combat global overcapacity and bad actors – unilaterally dropping them in this circumstance fails to do that.
We cannot risk losing more jobs to anticompetitive foreign actors, and cannot assume the dangers of depending on a global supply chain to provide America our infrastructure. Without a healthy domestic steel industry, the United States will be placing its faith in a precarious global market with the potential to backfire on both our economy and our climate. Without a real alternative, it is therefore crucial for the US to keep Section 232 tariffs on steel in place. After all, if it ain’t broke, don’t fix it, and Section 232 tariffs are working.
The views expressed above are solely the author's and are not endorsed by the Virginia Policy Review, The Frank Batten School of Leadership and Public Policy, or the University of Virginia. Although this organization has members who are University of Virginia students and may have University employees associated or engaged in its activities and affairs, the organization is not a part of or an agency of the University. It is a separate and independent organization which is responsible for and manages its own activities and affairs. The University does not direct, supervise or control the organization and is not responsible for the organization’s contracts, acts, or omissions.