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The Therapy Sessions
Saturday, September 20, 2003

Will Bush Learn From His Mistakes?

Steel Tariffs Appear to Have Backfired on Bush

In a decision largely driven by his political advisers, President Bush set aside his free-trade principles last year and imposed heavy tariffs on imported steel to help out struggling mills in Pennsylvania and West Virginia, two states crucial for his reelection.

Eighteen months later, key administration officials have concluded that Bush's order has turned into a debacle. Some economists say the tariffs may have cost more jobs than they saved, by driving up costs for automakers and other steel users. Politically, the strategy failed to produce union endorsements and appears to have hurt Bush with workers in Michigan and Tennessee -- also states at the heart of his 2004 strategy.

Jay at Shared Thought says:

While the tariffs probably did lead to the creation of steel jobs in Pennsylvania and West Virginia, I doubt they had much to do with the loss of manufacturing jobs in Michigan and Tennessee. They would have been lost in any case. That has more to do with NAFTA and the continuing trend of moving manufacturing jobs abroad.

Nonsense. By raising the price of a commodity like steel, you raise manufacturing costs, and companies must cut costs. Employees are expensive, so they go. Jay is right that manufacturing jobs will sometimes go to lower wage countries, but steel tariffs are going to encourage that process further.

Jay seems to believe that environment in the 1950's (where the US was the sole global manufacturer standing) can be brought back in 2003 with tariff laws. Tariffs cut us off from the world, and they kill our exporters: their competitors are now not only using cheaper labor, but cheaper steel (purchased at the real global price) as well.

It's no wonder that Ford, GM, Caterpiller and Boeing (to name a few) lobbied heavily against the tariffs.

Tariffs are generally bad policy.

I know of a global product that, unlike steel, is produced by our enemies. It is produced by industries that are state run, so the revenue from this product goes right into the hands of corrupt leaders. The American competitors can't match the low price of this import, and it is clear that the producers have used a cartel to mainpulate prices.

This looks like a clear case for US tariffs! To protect the US economy, and its workers! Am I right, Jay?

But what if the product is OIL?

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