Making News: Cited in The Washington Post, Newsweek…& More!


, , , , , , , , ,

Those Trump tariffs kept me awfully busy this past week – here’s a quick rundown of media-related developments:

Yesterday morning, I was interviewed on Akron, Ohio’s WAKR-AM on the new course apparently being taken in U.S. trade policy. I’ll post a link to any podcast that becomes available, but unfortunately, WAKR doesn’t present podcasts comprehensively.

Also yesterday, my analysis of the new U.S. manufacturing jobs numbers was cited in a post on the subject by Economics and Finance Editor John Carney. Here’s the link.

On March 7, my views on senior White House economic aide Gary Cohn’s tariff-related resignation were quoted in this Washington Post article.

That same day, this Newsweek piece referenced my findings strongly indicating that many other U.S. trade partners have filling the vacuum that’s been left in the American market by tariffs that have kept out much Chinese steel – including by simply sending their imports from China stateside.

And also on March 7, Steel News featured coverage of my Monday CNBC appearance on the Trump tariffs. Here’s the link.

And keep checking in with RealityChek for news of upcoming media appearances and other events.


(What’s Left of) Our Economy: Strong Manufacturing Jobs Numbers Still Aren’t Moving the Wages Needle


, , , , , , , , , , ,

February’s jobs report showed a continuation of strong employment numbers and weak wage performance in manufacturing. The latest 31,000 monthly jobs gain kept up a streak of strong sequential jobs increases that began in July. Manufacturing’s 224,000 year-on-year payrolls increase was its best such improvement since May, 1998’s 262,000. Revisions boosted the sector’s employment by 28,000 for December and January. Manufacturing has now regained 50.63 percent of the net jobs it lost during the Great Recession, and it since last February, has raised its share of overall U.S. employment from 8.49 percent to 8.51 percent. The automotive sector, moreover, ended a technical jobs recession that had begun in April, 2016.

Yet current dollar wages flat-lined sequentially in February for manufacturing, while they grew by 0.15 percent for the overall private sector. And the yearly manufacturing wage advance of 1.67 percent was the slowest since July, 2015’s 1.49 percent. Further, in real terms, both manufacturing wages and private sector wages are in technical recession, with the former down on net since January, 2016 and the latter since last May.

Here’s my analysis of the latest monthly (February) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>February’s strong monthly employment gains and major upward revisions combined to bolster considerably manufacturing’s recent jobs performance.

>Industry’s payrolls grew by 31,000 sequentially in February, while its January jobs increase was revised up from 15,000 to 25,000, and December’s from 21,000 to 39,000.

>Largely as a result, manufacturing payrolls jumped by 224,000 on an annual basis – the best such performance since May, 1998’s 262,000.

>Between the previous Februarys, manufacturing jobs grew by just 23,000.

>Moreover, the year-on-year figures mean that manufacturing employment has been growing faster than employment in the economy’s non-farm sector (the Bureau of Labor Statistics’ American employment universe).

>Last February, manufacturing accounted for 8.49 percent of total non-farm payrolls. This February, its share stood at 8.51 percent.

>Manufacturing has now regained more than half (50.63 percent) of the 2.293 million jobs it lost since the late-2007 onset of the Great Recession through the sector’s employment bottom in February and March, 2010.

>In addition, the automotive sector – which led domestic manufacturing’s early recovery rebound from the Great Recession – ended its employment recession in February.

>A 6,200 monthly jobs gain in February plus upward January revisions helped the motor vehicles and parts industries out of a period of net employment decline that had begun in April, 2016.

>Yet manufacturing’s sterling employment performance contrasts strikingly with its still-dismal wage performance.

>Whereas overall private sector wages rose 0.15 percent sequentially in February, manufacturing wages recorded no change.

>Industry’s wage revisions were mixed, with January’s 0.11 percent growth now judged to be 0.22 percent, December’s 0.11 percent advance now pegged at 0.19 percent, but November’s 0.15 percent gain revised to zero.

>The year-on-year manufacturing wage picture is no better. Since last February, industry’s pre-inflation hourly pay is up just 1.67 percent – the slowest such rate since July, 2015’s 1.49 percent.

>Worse, between the previous Februarys, manufacturing wages grew a much faster 2.88 percent.

>Current dollar private sector wages have risen 2.61 percent on an annual basis.

>As a result, since the start of the current economic recovery, in mid-2009, pre-inflation private sector wages are up 25.80 percent more than manufacturing wages. A year ago, the gap was only 21.32 percent.

>Manufacturing’s real wage record lately has been even dimmer in absolute and relative terms.

>The latest data go through January, but that month, inflation-adjusted pay in industry fell 0.37 percent sequentially – a bigger drop than that for the overall private sector (0.28 percent).

>Year-on-year, real wages are up 0.66 percent in the private sector in toto versus a 0.29 percent dip for manufacturing.

>And worse still, although both the private sector and manufacturing are suffering real wage recession, the former’s began only last May – with after-inflation hourly pay down 0.28 percent since then.

>For manufacturing, such pay is down 0.09 percent since January, 2016.

>Further, since the current recovery’s mid-2009 onset, overall real private sector wages have risen more than ten times faster (3.98 percent) than manufacturing wages (0.38 percent).

>Over the longer term, moreover, manufacturing remains a significant jobs laggard. Whereas industry has now regained more than half the jobs it lost during the recession and its aftermath, the overall private sector has more than doubled its recessionary job losses. Since shedding 8.780 million positions on net from December, 2007 through February, 2010, it has created 18.569 million.

>In addition, manufacturing employment is still 8.24 percent below its pre-recession peak of 13.746 million jobs, overall private sector employment has risen 8.43 percent during that period.

(What’s Left of) Our Economy: Martin Wolf Whiffs on the Trump Tariffs


, , , , , , , , , , , , , , ,

I hate to go after the Financial Times‘ Martin Wolf, because he’s definitely one of the world’s smartest and most responsible economics commentators. Unfortunately, his March 6 column on the Trump tariffs fell so far short of his standards – and in fact simply parrots so much wrongheaded and/or simplistic trade-related conventional wisdom – that a response is essential. Let’s take his main arguments seriatim.

Wolf is apparently upset that the tariffs are “explicitly intended to last a long time.” But what could make more sense? If the aim is to spur more American steel and aluminum output, which requires major capital investments that need time to pay off, short-term tariffs, or tariffs with a publicized termination date, are bound to fall way short of their mark. The former will naturally scare off investors that simply have the requisite time horizon; the latter will additionally tell potential capital sources and foreign steel and aluminum exporters exactly when they can resume dumping subsidized product.

Wolf believes that the tariffs will so raise the costs of steel- and aluminum-using U.S.-made products that these industries and their workforces, which vastly outnumber those of the metals-makers, will suffer major losses of global competitiveness. In making this claim, he both overlooks the relatively small steel and aluminum content of many of these products, and oddly dismisses any possibility that these businesses will find ways to offset any notable input price increases with greater efficiencies elsewhere in their operations.

I say “odd” because that’s exactly what conventional economics tells us will happen – at least with companies determined to stay in their respective businesses. It’s one main reason why productivity growth exists at all. It’s also at the least significant that no less than General Motors Chair and CEO Mary Barra has stated that that’s exactly what her company will do: “We would look to find offsets and efficiencies to offset that [higher steel prices] and not have to pass it on to the customer.”

Wolf worries about the spread of what he admits are trade actions confined to steel and aluminum because so many American trade partners will retaliate. I was waiting for him – as a major supporter of free trade – preemptively to scold these countries for not realizing that theory holds that the best way to respond to tariffs is by compensating losers, not by retaliating. But it doesn’t appear to think that this venerable maxim applies outside the United States.

Wolf predicts that this retaliation will take the form of World Trade Organization  (WTO) challenges and safeguards “to forestall diversion of imports on to their markets.” But because the global steel market is a single integrated market (like so many other markets in this era of extensive globalization), such country-specific measures will fail to prevent diversion as completely as have similar past U.S. Measures. That’s probably why the European Union, for example, has hinted that it won’t wait for the WTO Good Housekeeping Seal for any retaliation. Which of course would be illegal according to WTO rules.

Wolf regurgitates the argument that the sweep of the Trump tariffs will hit “friends and allies” – belying the claim that they’re based on national security considerations. As I’ve noted, though, many of these supposed friends and allies have long been directly or indirectly helping make sure that an outsized share of Chinese-spurred global overcapacity in steel and aluminum winds up being sent to the United States. With allies like these….

Wolf expresses bewilderment that the United States would seek protection for its steel and aluminum industries because output in both has been “stable” since roughly 1990. But in the business world, that’s a euphemism for “no growth since roughly 1990.” Does that scream “competitiveness” to you? Moreover, Wolf overlooks the loss of global and U.S. market share for both sectors – not normally a sign of companies or industries with bright or even viable futures. (See here for the steel data and here for the aluminum figures.)

Wolf uses tariffs as his main measure of whether, as many trade policy critics argue, the United States really is the world’s least protectionist major economy. But nowhere in his article does the term “non-tariff barriers” appear – a shocking omission given their prevalence and strong growth as global negotiations have reduced tariff rates worldwide.

Finally, Wolf alludes to the canard that America’s national savings rate is overwhelmingly responsible for its bloated trade deficits. In fact, the relationship between the trade and broader current account balances on the one hand, and the savings rate on the other is a mathematical identity. As such, it says nothing whatever about causation – which could easily flow the other way.

It’s understandable that Wolf doesn’t like the Trump tariffs per se – I’ve been critical of them in some respects myself. But the scornful tone of his article, and its utter failure even to consider obvious rejoinders (much less address them) indicates that something deeper is at work here: One of our most thoughtful and knowledgeable economics analyst has come down with a bad case of Trump Derangement Syndrome.

(What’s Left of) Our Economy: On Eve of Trump Tariffs, a Big Increase for the (January) U.S. Trade Deficit


, , , , , , , , , , , , , , , , ,

The U.S. monthly trade deficit surged in January to its highest level ($56.6o billion) since October, 2008 ($60.19 billion) – when the Lehman Brothers bankruptcy sparked a worldwide financial and economic panic.

New all-time records were set by monthly services exports ($66.66 billion) and imports ($46.78 billion), and December results for both were revised significantly upward (0.77 percent for the former, and 2.07 percent for the latter). The trade deficit in petroleum products jumped by 116.64 percent on month in January – the biggest sequential percentage increase ever – to $7.08 billion. That total was a post-March ($8.28 billion) high.

America’s January merchandise trade deficit in goods ($76.49 billion) was a post-July, 2008 ($77.63 billion) high, while the trade gaps in manufacturing and in goods with China bounced back on month to their second highest all-time totals ($35.95 billion and $86.62 billion, respectively). Moreover, U.S. merchandise exports to China sank by their greatest percentage on month (28.05 percent) since January, 1999 (43.37 percent). Total exports fell on month (by 1.30 percent) for the first time since October, and combined goods and services imports dipped fractionally (to $257.51 billion) from the upwardly revised record set in December.

Here are selected highlights of the latest monthly (January) trade balance figures released this morning by the Census Bureau:

>The combined U.S. goods and services trade deficit rose on month in January to its biggest total ($53.91 billion) since October, 2008 ($60.19 billion) – when the world economy teetered on the brink of meltdown due to the Lehman Brothers bankruptcy.

>The figure represented a 4.99 percent increase from a December figure of $53.91 billion that was revised up by an unusually large 1.49 percent.

>January saw all-time records for monthly services exports and imports. The former improved sequentially from by 0.41 percent, from $66.39 billion to $66.66 billion, while the latter grew by 0.38 percent, from $46.60 billion to $46.78 billion.

>At the same time, both services trade figures also saw major revisions in the December – both upward. The exports number was raised by 0.77 percent, and imports upgraded by an enormous 2.07 percent.

>January’s trade deficit increase was led in relative terms by the nation’s oil trade deficit – which more than doubled sequentially, from $3.27 billion to $7.08 billion. That was the highest such total since last March’s $8.28 billion.

>Partly as a result, the U.S. merchandise trade deficit widened sequentially in January by 3.79 percent, to $76.49 billion – its highest such level since July, 2008’s $77.63 billion.

>But manufacturing contributed significantly to the rise in the overall trade deficit and the merchandise shortfall as well. Its chronic trade shortfall ballooned by 14.54 percent on month to hit $86.62 billion – just shy of October’s record of $88.98 billion.

>Manufacturing exports slid by 8.99 percent sequentially in January, from $94.89 billion to $86.36 billion, while imports were off by only 0.08 percent, from $173.13 billion to $172.99 billion.

>In turn, helping to fuel this deterioration in the manufacturing trade balance was the 16.70 percent worsening of the U.S. merchandise deficit with China. The January figure of $35.93 billion was the second highest of all time, too – trailing only September, 2015’s $36.29 billion. The increase, moreover, was the biggest since May, 2016’s 19.43 percent. 

>Mainly responsible for the China trade deficit’s increase was a 28.05 percent nosedive in U.S. goods exports to the strongly growing People’s Republic. Although the decrease followed a record December export total of $13.67 billion, it was still the biggest such percentage drop since January, 1999 (43.37 percent). 

>The $9.84 billion in U.S. goods sales to China in January, moreover, was the lowest such figure since June’s $9.71 billion. 

>U.S. merchandise imports from China rose – by 2.95 percent, to $45.79 billion.

>Total goods exports were down in January by 1.30 percent (to $200.91 billion) from December’s upwardly revised $203.61 billion. The drop was the first since October.

>Total imports in January dipped only fractionally – to $257.510 billion – from December’s upwardly revised record of $257.514 billion.

>The high tech goods trade deficit rose by 14.25 percent on month in January, from $10.06 billion to $11.49 billion.

>High tech exports plunged on month by 18.11 percent to $27.46 billion – a post February, 2017 ($25.39 billion) low, and the biggest falloff since January, 2017’s 19.01 percent.

>High tech goods imports sank, too – by 10.64 percent, to $38.95 billion. That was the biggest drop since last February’s 13.31 percent.

>As the Trump administration’s efforts to renegotiate the North American Free Trade Agreement (NAFTA) face an uncertain future, America’s merchandise trade deficit with Canada shot up by 65.04 percent on month in January, to $3.64 billion. That’s its highest level since December, 2014 ($4.07 billion).

>Yet the U.S. goods trade shortfall with Mexico decreased by 23.03 percent – to $4.14 billion. That’s the lowest such total since last January ($3.95 billion).

>Trade tensions with the European Union (EU) seem to growing as well, due mainly to the Trump administration’s announcement of steel and aluminum tariffs. In January, however, the merchandise trade gap with the EU fell by 13.88 percent, to $13.62 billion.

>President Trump is also hoping to revamp the bilateral U.S.-South Korea trade agreement (KORUS). In January, America’s goods trade deficit with South Korea hit $1.97 billion – a 57.57 percent monthly rise. At the same time, December’s $1.25 billion goods trade gap was the smallest since December, 2016’s $1.17 billion.

(What’s Left of) Our Economy: So You Think There’s Free Trade in Steel?


, , , , , , , , , , , , ,

If there’s anyone out there who honestly believes that global steel trade has anything to do with free trade or free markets, and that many of America’s leading trade partners other than China are directly or indirectly complicit in rigging this commerce against the United States, here’s some data you need to see.

And P.S. – notwithstanding their own efforts to keep government- subsidized Chinese metals out of their markets, and the lip service they pay to the idea of cooperating to cut China’s massive overcapacity, the number of countries whose steel industries in particular have been doing just fine all the same should make clear why World Trade Organization (WTO) and other multilateral actions can’t possibly address the underlying problem of the Chinese state-sponsored glut. At least not until via tariffs or similar measures, Washington makes clear that the economies, who comprise the vast majority of WTO members, can no longer abet the Chinese with impunity.

First, let’s look at the percentage of world steel output by country (or political grouping, in the case of the European Union), and how it’s changed recently. These are volume figures from the World Steel Association for the world’s leading steel producers:

         2010                                                   January, 2018

US:    7.46                                                           4.89

China:   42.62                                                    48.05

EU 27: 12.18                                                    10.32*

Japan:   7.73                                                        6.48

South Korea:   4.12                                             4.39

India:   4.82                                                         6.47

Vietnam:   0.30                                                    0.76

Taiwan:   1.39                                                      1.41

Turkey:   2.06                                                      2.28

Brazil:   2.32                                                        2.06

Russia:   4.48                                                       4.09

Thailand:   0.29                                                    0.30

Canada:   0.92                                                      0.82

Mexico:   1.18                                                      1.16

Argentina:   0.36                                                  0.25

South Africa:   0.54                                             0.41

Egypt:   0.47                                                        0.47

Australia:   0.51                                                   0.35

* The January, 2018 figures are for 28 European Union countries.

What leaps out from these statistics: Except for Australia, the country that has lost the greatest percentage of global output share by far during this period has been the United States. And everyone else has either gained or pretty much held their own. Anyone care to explain this development by arguing that the United States has the world’s least competitive major steel sector? By a mile?

Next let’s take a look at changes in steel-producing countries’ exports to the United States over the last year. In and of themselves, they don’t prove that these economies are transshipping steel to the American market to help Beijing evade recent U.S. tariffs on Chinese steel, or that they have been responding to their own China steel problems by ramping up their exports to the United States. But the size and suddenness of these export increases is certainly noteworthy. In particular, it’s kind of amazing how much surge capability these figures make clear is apparently possessed by smallish countries.

Here’s how America’s steel imports have increased by volume in percentage terms from some important steel producers between the third quarter of 2016 and the third quarter of 2017, according to the U.S. Commerce Department’s latest figures:

global total: +19.56

China: -5.0

India: +209.0

Russia: +64

Taiwan: +36

Thailand: +274

South Africa +68

United Arab Emirates +98

Many of the value figures, drawn from the U.S. International Trade Commission, are even more striking. (These numbers cover iron and steel products and their percentage increases between full-year, 2016 and full-year, 2017.) Some of these percentage increases reflect the “law of small numbers” – the ease with which modest increases in absolute terms can generate big relative increases when the baseline is low.

But all of the below countries sold at least $13 million worth of iron and steel products to the United States in 2017. Also, all of the below increases followed sizable, and some cases enormous, decreases between 2015 and 2016, when overall U.S. imports fell by 25.7 percent. And this list leaves out countries whose iron and steel exports to the United States grew in both years, but ramped up rapidly in 2017. The main examples are Indonesia, the Dominican Republic, Kazakhstan, and Peru.

World: 35.6

China: 15.2

EU 28: 19.4

Japan: 1.6

South Korea: 21.2

India: 88.8

Taiwan: 33.1

Brazil: 51.8

Russia: 98.1

Australia: 65.4

Thailand: 213.7

Canada: 26.6

Mexico: 27.4

Argentina: 198.6

Albania: 583.5

Bahrain: 26,148.1

Belarus: 116.9

Colombia: 96.6

Georgia: 57.0

Guatemala: 430.1

New Caledonia: 70.7

New Zealand: 64.8

Oman: 81.1

Pakistan: 41.1

Peru: 127.4

Philippines: 147.1

Saudi Arabia: 794.5

Ukraine :111.1

United Arab Emirates: 123.7

Zimbabwe: 376.1

These data paint a compelling picture of the world’s leading steel producers complaining endlessly about the distortions created by China’s state-created global steel glut – to the point of creating a special multilateral forum for addressing the issue – but playing footsie with the Chinese behind the scenes at American steel producers’ expense. Which places a heavy burden of proof on opponents of President Trump’s response to explain how this situation bears any resemblance to free trade, and why broad-based tariffs aren’t an absolutely essential response.

Making News: Video of Today’s CNBC Interview on the Trump Tariffs


, , , , , ,

I’m pleased to report that the streaming video is now on-line of my appearance this afternoon on CNBC’s “Closing Bell” show. The subject: those new Trump tariffs on U.S. imports of steel and aluminum – and just how much free trade actually has been taking place in the world lately. Just click on this link if you missed the live broadcast.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: On CNBC this Afternoon on Trump Tariffs – & More!


, , , , , , , , ,

I’m pleased to announce that I’m slated to appear today on CNBC’s “Closing Bell” program to talk about President Trump’s announced new tariffs on U.S. steel and aluminum imports.  The segment is scheduled to begin at 3:10 PM EST.

You can watch on-line at, and as usual, I’ll post a streaming video of the interview as soon as one’s available.

Also, it was great to be mentioned in Tom Piatak’s new posting on the subject on the website of Chronicles magazine. Here’s the link.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: New Trump Tariffs and China Podcasts – & More


, , , , , , , , , , , , , , , , , , , ,

I’m pleased to report that, thanks largely (but not entirely) to the firestorm set off by President Trump’s announcement of steel and aluminum tariffs, it’s been a busy media period recently.

At the crack of dawn (literally!) this morning, I was interviewed on the subject on “Morano in the Morning” on New York City’s AM 970 The Answer. Here’s the podcast.  My segment begins at just before the 16-minute mark.

Speaking of podcasts, here’s the one of my appearance on John Batchelor’s nationally syndicated radio show last Wednesday. The subject, as you may recall, was the prospect of foreign interests taking over one of America’s leading semiconductor manufacturers – Qualcomm.

In addition, in a March 2 post, Batchelor Show co-host Gordon G. Chang quoted in more detail my views on this proposed deal and the broader subject of foreign takeovers of key defense-related American economic assets. Here’s the link.

Also on March 2, The Christian Science Monitor featured my views on the Trump tariffs in this lengthy news analysis.

In addition, on that day,‘s coverage of the tariffs included my views at length.

The day before, Plastics News highlighted my analysis of the latest U.S. manufacturing trade figures in this post.

On February 19, in another post, Gordon presented my views on another proposed Chinese takeover of an important American asset – this time, an entire stock exchange!  Here’s the link.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Following Up: More on the Trump Tariffs


, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

I could spend all day today rebutting ignorant, biased, and simply inane commentary on President Trump’s Thursday announcement that stiff tariffs will be imposed on U.S. imports of steel and aluminum (along with watching the plethora of college hoops on TV today!). Instead, I’ll offer some follow-on thoughts to the tariff talking points I posted yesterday.

>The European Union in particular seems outraged by the Trump decision, and has threatened to retaliate with tariffs on its own on a wide range of products, including some from Wisconsin and Kentucky. These of course happen to be the home states of House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. It’s an understandable, and certainly clever, impulse, and in 2003, something like it succeeded in convincing former President George W. Bush to lift steel tariffs he had imposed 18 months earlier.

Of course, Bush 43 was no Trump. He was a committed free trader and globalist, and/or agent of of America’s powerful corporate offshoring lobby. But here’s something that needs to be considered by Messrs Ryan, McConnell, and other lawmakers at whom the Europeans or other powers may take aim: What if, shortly after September 11, Osama Bin Laden had threatened to destroy major targets in their home states or districts unless the United States withdrew militarily from Afghanistan and left him alone. Would the affected legislators have run to the White House to plead for an abandonment in the war on terror? Not likely.

I know that war and economics are different (although given the importance of economic strength as a source of military strength and overall national success, the similarities and overlap are widely overlooked). But don’t doubt for a minute that American politicians’ reactions to these European threats will be watched closely in all the world’s capitals, and that signs of weakness will be factored into foreign decisions to abide by or violate current trade agreements at the U.S.’ expense, or take other measures to gain advantage in their own, American, or third-country markets that clash with free market and free trade norms.

So here’s hoping that American Members of Congress and Senators will show some backbone, and make clear to the nation’s trade partners that they won’t permit themselves and the country at large to be hanged separately.

>Speaking of hanging separately, quite naturally, U.S. steel- and aluminum-consuming industries are concerned that their global competitiveness will be harmed if they’re forced to use more domestic metal in their products. They need to keep two considerations in mind. First, if foreign governments are permitted by Washington’s inaction to dump major American industries like aluminum and steel out of existence, consuming sectors would be next in line. 

Second, there is indeed no inherent reason to make the consuming industries pay any penalty at all. When I was at the U.S. Business and Industry Council, which represented many steel-consuming companies and industry groups, we persuaded them that the best solution would be tariff protection for them as well. The tariff complaints coming from such sectors today reveals that the Trump administration hasn’t put this possibility on the table. That’s a major missed opportunity, and the President should realize that such offers not only can build support for the steel and aluminum tariffs. They can also expand the constituency for broader America First trade policies. (New Trump statements on possible auto tariffs make clear exactly the types of steps needed, although as is usually the case, they work best when applied across-the-board.)   

>Speaking of missed opportunities, here’s another (big) one – the handling of some allied countries’ indignation about being treated as threats to America’s national security because of their steel and/or aluminum shipments. In several major cases, these complaints could have been prevented had the administration recognized that Australia, Canada, and the United Kingdom are defined by American law as part of the nation’s defense “technology and industrial base.”

I’m not necessarily a supporter of this policy, but since it exists, these countries have an entirely legitimate point regarding their possible inclusion in the metals’ tariff regime. And the Trump administration should have explained to them that they were of course being exempted. Moreover, the Defense Department should have told the rest of the administration about the legal and legislative situation. Yet Pentagon chief James Mattis’ memo to his administration colleagues outlining his department’s position on the tariffs never mentioned it.

Not that these allied countries are entirely blameless for the row. They could have raised the issue when the prospect of sweeping U.S. tariffs was first raised. But all indications are that they preferred to grandstand.

>As should now be expected, the media coverage of the tariff controversy has often veered off into economics and policy La-La Land. Two of the funniest examples I’ve seen so far (and they’re nearly identical): criticizing the announced tariffs because they only boast the potential of bringing back high-value manufacturing to the United States instead of lots of industrial jobs.

Think I’m kidding? Here’s Washington Post correspondent David J. Lynch: “If tariffs prompt companies to move production back to the United States, they would likely opt for highly automated plants that require fewer workers. Trump’s tariffs ‘would bring back 21st-century factories where we lost 20th-century factories,” [economist Gordon] Hanson said this week at the National Association for Business Economics conference in Washington.”

Here’s no less than Nobel Prize-winning economist and New York Times columnist Paul M. Krugman: “[T]he tariffs now being proposed would boost capital-intensive industries that employ relatively few workers per dollar of sales; these tariffs would, if anything, further tilt the distribution of income against labor.”

What both authors are somehow missing is how manufacturing is valuable for much more than high wage employment. It’s long been the nation’s leader in productivity growth. It generates nearly 69 percent of private sector American spending on research and development. And don’t forget its high employment and output multipliers – which mean that each dollar of manufacturing output punches far above its weight in generation production and jobs elsewhere in the economy.

That last point is particularly relevant to Krugman’s claim about labor’s low share of national incomes. The manufacturing employment multiplier tells us that adding to industry in America – including capital-intensive industry – will promote employment in related sectors like logistics, plus revitalize the retail and other service sectors of the towns and cities and counties where the new factories are built. Those jobs may not pay as well as the manufacturing jobs lost. But they’re sure better than the economic death that often results when communities lose their factories.

(What’s Left of) Our Economy: The Case for Trump’s New Metals Tariffs


, , , , , , , , , , , , , , , ,

President Trump has announced his decision to impose tariffs on U.S. imports of steel and aluminum – cue the trade war hysteria. And the national security hysteria. And the inflation hysteria. Here are some talking points I hope the administration will feel free to steal as it defends the decision in the days leading up to the release of the final tariff plan:

>Many countries have declared their intention to retaliate against the American tariffs with higher barriers to U.S. exports. Curiously, they are overlooking the Chinese government-subsidized overcapacity at the root of the long-time distortions in world steel and aluminum markets.

>Many of these countries want the problem tackled multilaterally. But the World Trade Organization (WTO) has failed to stem this overcapacity (or deal effectively with many other forms of Chinese trade and broader economic predation), and a G20 forum specifically addressing the steel issue has produced nothing since its founding in December, 2016.

>Although major steel-producing powers like the European Union have imposed their own steep tariffs on shipments from China, the global glut has continued. One reason may be that, since the global economic recovery took hold in 2010, according to World Steel Association data. the United States has been the major steel producer that has suffered by far the greatest loss of global production share by volume. (See this post of mine for the 2010 figures and the Steel Association’s latest report for the most recent – January, 2018 – figures.) And as of the most current World Steel Association data (2016), the United States is also the steel producer with the highest steel trade deficit by volume (21.7 million tons). 

>As a result, charges that American steel tariffs in particular will jeopardize the rules-based global trade system seem to be arguing that this system requires the United States to remain as the world’s dumping ground for government-subsidized steel.

>A much more constructive response from America’s trade partners would be finally getting serious about shutting down China’s overcapacity and placing market forces back in the saddle for global steel pricing. The Trump tariffs should be seen as a signal that the United States will no longer accept world steel trade patterns that treat the United States as the fall guy, and should therefore act as a spur to achieve genuinely meaningful multilateral results.

>The above gaming of global steel trade by so many American trade partners also explains the need for the kinds of sweeping measures made possible by the national security-oriented Section 232 of U.S. trade law, rather than the narrower curbs required by, say, the countervailing duty statutes.

>Fears have been expressed in the U.S. foreign policy community, and by the Trump administration’s Defense Department, that certain tariff schemes may needlessly harm America’s relationships with key security allies. Those voicing such concerns should also explain why countries that would permit these U.S. measures to undermine alliance relationships should be seen as reliable partners when overseas crises erupt.

>Tariff opponents contend that America’s use of an allegedly bogus national security rationale for the curbs will open the doors for other members of the WTO to use equally specious justifications for their own tariffs on numerous products. These opponents seem to forget that most of the world’s major economies, which rely heavily on export-led growth resulting from large trade surpluses, so far have encountered little difficulty in protecting their own domestic markets via a wide range of both tariff and non-tariff trade barriers.

>New national security rationales for new tariffs will be especially suspicious if used by the numerous American security allies that have been free-riding on U.S. defense guarantees for decades – and skimping on their own defense spending. These allies include Germany, Japan, South Korea, and Canada.

>Tariff critics also insist that the American economy will suffer major harm from foreign retaliation. They seem – oddly – convinced that U.S. trade partners that rely heavily on net exporting to the United States for their growth have nothing to fear from further the American trade restrictions that may result. Will these countries really launch trade attacks on one of their best customers?

>Tariff opponents focusing on economic impacts argue that the measures will increase the cost of a key American manufacturing input, and reduce the competitiveness of domestic steel-and aluminum-using industries. They seem to fear that these industries cannot become or remain globally competitive if such inputs are priced via free market mechanisms, rather than kept artificially cheap due to foreign government decisions.

>These economically focused tariff opponents also seem to believe that the current U.S. economy is one characterized by companies that enjoy considerable pricing power. Given inflation that has long undershot the Federal Reserve’s target, that’s a difficult argument to understand.

>In addition, those with an economic focus appear unconcerned about the prevalence and spread of government interventions in trade flows not only in steel, but in a wide variety of traded goods. If foreign governments conclude that they can subsidize and dump two key American industries out of existence, why would they stop with steel and aluminum? How can a growing presence of foreign government-subsidized goods (and services) help strengthen free markets in the United States and enable Americans to reap their maximum gains? And how can such growing foreign intervention help the global economy as a whole progress toward reaping the maximum gains of unfettered trade?

Over to you, Mr. President!