It is well established that even well intentioned government intervention in industry very often ends up causing more problems than it solves. Today one of the issues facing the United States is a loss of jobs in the steel industry and so President Trump claimed this is a National Security Issue and so used his unilateral power to impose a 25% tariff on imports of steel into the United States.
On its face, this seems like a good idea. Simplistically, if decrease the ability of other countries to export their steel to the US will result in the creation of more US steel jobs. However, the world is not a simple place and what actually happened was:
- Few new US steel jobs were (or will be) created as steel foundries take time to expand and most of that expansion will be done with… wait for it… automation, not direct jobs
- The cost of goods produced in the US has to go up to accommodate that tariff. That is a particularly ugly reality for US consumers that like things made with lots of steel, like cars
- The US has trade agreements with many friendly countries like Canada, Japan and others that preclude such tariffs but cause diplomatic problems as exceptions are carved out
- Other industries then get in-line for their protection package causing a never ending tide of companies looking for their handout
- Some important civic projects like steel intensive bridges have their costs increase or projects delayed so long (because engineers now spec required US steel that is back-ordered) that they are cancelled outright or don’t get completed in a timely fashion.
The five points above are well documented oft discussed in the media. The video below however, points out two fascinating unintended consequences that we had not thought of: