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The winners and losers from tariffs are never as clear-cut as politicians assume. For every domestic industry that benefits from a high tariff, the high prices it engenders invariably harm other industries. Often, these costs are greater than the intended benefits.

For instance, in the 1980s, Voluntary Restraint Agreements that reduced the importation of steel may have saved jobs in the steel industry, but studies estimated--one of which was my own--that it cost at least as many jobs in the auto and construction equipment industries as they saved.

Such an occurrence may very well occur in the steel industry. President Biden recently announced that he will block Nippon Steel’s acquisition of U.S. Steel, and Donald Trump has repeatedly pledged to prohibit the proposed merger, despite the fact that it appears to be the only way for the former to remain competitive in the global steel market.

Trump’s attitude is that if an industry is in trouble, protecting it from foreign competition is invariably the answer. In 2017, when announcing his national security strategy, he declared that “economic vitality, growth, and prosperity at home is absolutely necessary for American power and influence abroad.” In 2018, his administration then called upon that thought when imposing sweeping tariffs--so-called Section 232 tariffs--on steel and aluminum, famously tweeting at the time that “A strong steel and aluminum industry is vital to our national security… If you don't have steel, you don't have a country.”

However, not all domestic manufacturers using steel – especially niche steel products -- benefited from these tariffs. For instance, domestic food can makers are now facing critical obstacles because the tariffs greatly increased the price of goods needed for production and reduced the availability of a key input in a food can called tinplate steel.

Tinplate steel is an essential component of producing a food can, constituting about two-thirds of the can’s cost. Manufacturing requires a steel mill to add a thin layer of tin to the surface, which reduces corrosion. Only two American companies still produce tinplate steel, leaving producers mostly dependent upon imported tinplate. Unfortunately, the costs of tinplate produced in the U.S. and abroad have skyrocketed with the implementation and continuation of 232 tariffs.

Since President Trump’s initial announcement of these tariffs six years ago--which President Biden has kept in place—most production lines at U.S. tin mill steel plants have been shut down, and U.S. canned food production has suffered. These tariffs threaten the solvency of the domestic steel can industry.

In the last five years, the cost of canned goods has risen considerably. Prices first jumped when consumer demand for canned foods increased sharply during the pandemic, as families looked for more cost-effective options to put food on the table, and people were unable to dine out. At the same time, the high cost of tinplate put pressure on supply, as a major cost of producing canned goods is the actual can.

The increased expense of producing a can has contributed to food inflation: 20% of all food sold in U.S. grocery stores is in a can, and the cost of canned fruits and vegetables has increased by 32% since 2020.

The high cost of tinplate and the inflationary impact on the cost of American-made canned food have also led to a sharp increase in imported canned goods, which are more affordable even with Section 301 duties in place. In essence, the tariffs have imposed a tax on U.S. companies that produce canned goods but not on their foreign competitors, which cannot be what anyone intended when the tariffs went into effect. As a result, Chinese food companies have been able to steal market share from domestic food producers.

The Trump Administration can easily address this inadvertent problem either by granting a general authorized exemption of tinplate steel for the canned food industry or imposing duties on imported canned products or the cans themselves.

Warren Buffett sagely observed that tariffs are merely a tax on consumers and that they change what people buy and where goods are produced. Steel tariffs may have served to protect some jobs in the domestic steel industry, but they have inadvertently destroyed many other jobs in the process while dramatically impacting the domestic food and steel industries. The U.S. can and should act to alleviate these impacts on the food industry and consumers already struggling with inflation.

Ike Brannon is a senior fellow at the Jack Kemp Foundation. 


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