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The Tariff Fight

Tuesday, March 13, 2018 11:25
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Claiming U.S. national security and our economy require protection of the American steel and aluminum manufacturing industries, President Donald Trump instituted a 25 percent tariff tax on steel imports and a 10 percent tariff tax on aluminum imports, with some exemptions for American allies.

Trump is not the first Republican President to enact metals tariffs. Most recently, George W. Bush imposed steel tariffs in 2002; estimates suggested the decision, which was swiftly reversed, cost 200,000 American jobs.

It is easy to see the appeal to politicians of policies that reward powerful interests, but such policies lead the country toward a threat of oligarchy that is as old as the Republic: Big Business and Big Labor conspiring with Big Government to the detriment of other American businesses, working men, and consumers. While they satisfy an ill-advised campaign promise, Trump’s tariffs are a repudiation of his larger vow to “drain the swamp,” because tariffs enable powerful lobbies to secure state favor they have sought for years.

First, consider Big Business. Leading the cheerleading for Trump’s announcement was an entity—formally “The Public Policy Fund”—calling itself the “Alliance for American Manufacturing.” A 501(c)(6) trade association, the group’s mission statement claims it “brings together a select group of America’s leading manufacturers and the United Steelworkers.” The group does not disclose its membership on its website. Reporting surrounding the group’s founding in 2007 indicated that its members included U.S. Steel and Alcoa (a major producer of aluminum), and both those corporations stand to benefit from Trump’s new taxes. The Alliance had previously aired television advertisements pressing the President to make a tariff declaration. Indeed, the steel industry has been demanding trade restrictions for self-interested reasons for so long that the late Nobel Prize-winner economist Milton Friedman was denouncing steel tariffs 40 years ago.

Why might steel and aluminum manufacturers love a policy that makes their competitors’ products more expensive? If one buys the rhetoric, it’s all about national security and American employment. But in the Beltway swamp, one never should take the rhetoric of interest groups at face value. Even members of Trump’s Cabinet reject the “national security” justification: Defense Secretary James Mattis wrote a memo to Commerce Secretary Wilbur Ross (who was a steel industry financier before he entered government) denying that the Defense Department’s ability to meet defense needs was harmed by an open trade regime.

So if the “national security” justification is dubious, is not at least the employment justification based in truth? After all, if it were not, surely the American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), which claims to represent the interest of all American workers, would resist it. But AFL-CIO president Richard Trumka said, “We applaud the administration’s efforts” and called the tariffs “a great first step toward addressing trade cheating.”

But Trumka’s statement is in fact another facet of American oligarchy: The conspiracy of Big Labor and Big Government. For the AFL-CIO does not represent all American workers: It is a federation of labor unions (including Alliance of American Manufacturing member the United Steelworkers) and represents the interests of the unions as institutions. It may be the case that the United Steelworkers (and therefore, the AFL-CIO) would benefit from the tariffs, but economic analyses indicate that 6.5 million Americans work in steel-consuming industries which will be hurt by the tariffs, while only 140,000 work in steel production. All monopoly-bargaining unionism relies on getting the public to confuse the interests of union members with the interests of all workers; tariffs are merely the most obvious case of the phenomenon. (This may help explain why Hillary Clinton promised she would support protectionism if elected President, as the Wall Street Journal’s William McGurn recently reminded us.)

As important as the roster in “the room where it happens” in promoting oligarchic policy is the roster of those who are not. While export-oriented businesses—most notably the agriculture industry, represented by the American Farm Bureau—have expressed concern at Trump’s announcement and possible retaliation by trading partner countries, the largest group of Americans hurt by the announcement have no representation whatsoever. Consumers, who will bear the costs of the tariff as the price of cars, beer, food packaging, and a number of basic products rise in response, have no national advocacy organization that can be remotely considered representative. (Consumers Union and the National Consumers League, two organizations which may try to claim that mantle, are strongly aligned with liberal political interests and funded by left-wing foundations like the Ford Foundation, Public Welfare Foundation, and W.K. Kellogg Foundation.)

That is how the swamp functions: Since they are not organized, the interests of hundreds of millions of consumers are subordinated to 140,000 mostly union members and a handful of corporations. Libertarians call this the “problem of diffuse costs and concentrated benefits”; since each corporation and labor union stands to gain more than the average consumer will lose, the corporations and unions are more motivated than consumers to political action. The result is nothing short of rule of the few, by the few, and for the few.


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