Policy Brief: Round 3: 'Trade Discussion' or 'Trade War'? The Estimated Impacts of Tariffs on Steel and Aluminum

The paper by Joseph Francois, Laura M. Baughman, and Daniel Anthony was published on 5 June 2018 by Trade Partnership Worldwide, LLC.

SUMMARY:

This Policy Brief updates our March 13 Brief, which estimated the potential net impacts on U.S. jobs across all industries of steel and aluminum tariffs applied to targeted steel and aluminum imports from all countries except Canada, Mexico and Australia. Steel tariffs now apply to imports from all countries except Argentina, Australia, Brazil and Korea; quotas limit imports from Argentina, Brazil and Korea. Aluminum tariffs now apply to imports from all countries except Australia and Argentina; quotas limit imports from Argentina. “Compensation” in the form of tariffs imposed by major U.S. supplying countries on U.S. exports is now actively in process (for the purposes of this paper, we refer to compensation sought through the World Trade Organization (WTO) as “retaliation”).

We find that the tariffs and quotas coupled with retaliation would have positive employment impacts on U.S. steel and aluminum producers, as well as a handful of other sectors able to attract capital and labor released from sectors that are harmed by the tariffs and retaliation. However, tariffs, quotas and retaliation would harm the U.S. economy overall, including workers in other manufacturing sectors that use steel and aluminum. Those positive and negative impacts would ripple through the economy, affecting workers in every sector.

Briefly, we find:

• The tariffs, quotas and retaliation would reduce U.S. GDP by 0.2 percent annually, in the short term. While U.S. imports would decline, so, too, would U.S. exports.

• The tariffs, quotas and retaliation would increase the annual level of U.S. steel employment and non-ferrous metals (primarily aluminum) employment by 26,280 jobs over the first one-three years, but reduce net employment by 432,747 jobs throughout the rest of the economy, for a total net loss of 400,445 jobs;

• Sixteen jobs would be lost for every steel/aluminium job gained;

• More than two thirds of the lost jobs would affect workers in production and low-skill jobs.

• Every state will experience a net loss of jobs.