Make America Safe Again: A Steel of a Deal

 

President Trump knows more about structural steel than any president since the great civil engineer Herbert Hoover. Media of every flavor took the President’s comments, about requiring the use of US steel in petroleum pipeline construction, at face value, as only a jobs program. While “free” trade advocates got the vapors about protectionism and warned of harm to the US economy from artificially high prices, no one bothered digging into the critical assumption.

A year later, President Trump threatened to impose steel tariffs. There was much back-slapping and hand-wringing, all having to do with the price of steel and supposed resulting gains and losses in jobs. In the midst of this noise, Mark Davis, a Texas radio talk show host, took a call from a welder. (Starts at 23:50.)

This welder is in the high end of the trade, working with pipe that must pass X-ray inspection after welding. The welder said that any skilled welder knows, the moment he sets torch to pipe, whether the material is domestic or from supposedly lower cost countries. The foreign pipe, supposedly identical in specification, is actually contaminated with impurities which cause a high rate of X-ray failure and re-welding. Now think about what such impurities imply for the long-term safety of critical infrastructure. Care to drive over bridges, live or work in skyscrapers, with hidden defects in the structural supports? We build pipelines both for efficiency and safety relative to rail tanker shipment, so why would we allow avoidable risk to be built in?

But, hey, that’s just an anecdote, isn’t it? Well here is another anecdote. My parents have used the same elegantly simple Dansk stainless steel flatware pattern for more than 50 years of marriage. They are getting full value out of the lifetime warranty. Of all the original pieces, run through dishwashers well over 10,000 times, one has developed pitting. Then there are the replacement and extra setting they bought more recently, made in China. Most of these are now pitted, even though they are made of supposedly the same kind of steel, with the same warranty. See for yourself.

So now you have two anecdotes. Perhaps prudent public servants should inquire closely into the actual state of steel coming onto our shores. And maybe you really do get what you pay for, even if you are not fully informed of the risks baked into the bargain.

Published in Economics
This post was promoted to the Main Feed by a Ricochet Editor at the recommendation of Ricochet members. Like this post? Want to comment? Join Ricochet’s community of conservatives and be part of the conversation. Join Ricochet for Free.

There are 65 comments.

Become a member to join the conversation. Or sign in if you're already a member.
  1. Fake John/Jane Galt Coolidge
    Fake John/Jane Galt
    @FakeJohnJaneGalt

    Doesn’t matter.  Trump is wrong.  He is a idiot.  I don’t like his Twitter posts because he is mean to people that are mean to him.

    #hillary2020

    • #1
  2. ST Inactive
    ST
    @SimonTemplar

    Fake John/Jane Galt (View Comment):
    Doesn’t matter. Trump is wrong. He is a idiot. I don’t like his Twitter posts because he is mean to people that are mean to him.

    #hillary2020

    legit belly laugh.  the  #hillary2020 “made it pop.”

    Ricochet’s most humorous comment of the day award goes to FJ/FG for this jewel!

    • #2
  3. Ekosj Member
    Ekosj
    @Ekosj

    Is there a Zeno’s Paradox of anecdotal evidence?   Each data point in a sample is an anecdote and tells us nothing.     Yet, aggregated, we learn something from nothing.

    • #3
  4. TES Inactive
    TES
    @TonySells

    If  foreign steel is inferior and it actually is a material difference,  the market should be the ultimate judge. Not politicians.

    Some people are willing to pay less for knives and forks that will be more weathered after 10,000 trips in the dishwasher.  Some businesses are willing to buy cheaper steel that causes a skilled welder to have to re-weld a piece of steel.  We have been buying foreign steel for decades and I can’t remember any bridge, road, or pipeline failure that was ever attributed to the quality of the steel.

    You’re not talking about what consumers are willing to pay for a product, you’re talking about what you think they should buy. You’re not smarter than the market.  Nobody is.

    • #4
  5. Joe P Member
    Joe P
    @JoeP

    Clifford A. Brown: Media of every flavor took the President’s comments, about requiring the use of U.S. steel in petroleum pipeline construction, at face value, as only a jobs program.

    The media reported it that way because that’s what the stated reason for the policy is. That, and the stated policy for the tariff is that we need to get Americans working in steel mills again. There is no need to blame the media for this when you can YouTube statements by Trump and Wilbur Ross and plainly see after five minutes that jobs are what they care about.

    You can try to invent the justification of product quality and pass it off as the reason, but that doesn’t change the argument coming out of Wilbur Ross’ mouth.

    • #5
  6. Joe P Member
    Joe P
    @JoeP

    Clifford A. Brown: So now you have two anecdotes. Perhaps prudent public servants should inquire closely into the actual state of steel coming onto our shores. And maybe you really do get what you pay for, even if you are not fully informed of the risks baked into the bargain.

    Let’s stop and ask ourselves a question: given that you want to argue that the steel itself is dangerous, how is a tariff a morally justifiable solution to this problem?

    I mean, heroin from Afghanistan is dangerous, in that people get addicted to it and die, so we ban it completely. We don’t tax it at 25% and still let people use it if they feel like paying the tax. Presumably, there could be instances where people still use the awful Chinese steel even when the price is 25% larger than it should be, e.g. if there’s a shortage of steel. The possibility that a bus full of children will die because it’s made out of bad steel from China that corrodes is not eliminated.

    So, how does a 25% tax on any steel from any country outside the United States prevent bad steel from China from getting into the United States? If this is really a public safety issue (it’s not), how is anything short of banning it completely justified?

    Are you consistent about this sort of thing? Do you approve of cigarette taxes that use the same logic but still let people kill themselves with lung cancer? Would you ask public officials in Michigan to investigate the state of steel coming from West Virginia if these kind of questions were raised about its quality?

     

    • #6
  7. Ekosj Member
    Ekosj
    @Ekosj

    TES (View Comment):
    You’re not smarter than the market. Nobody is.

    Well … let’s not be so hasty.  You should be right.    In a free market you would be right.   But … Let’s think about the financial crisis.    The market was kind’a stupid then.    And there certainly were people who proved to be ‘smarter than the market’.

    Why was that?     Because government basically put their thumb on the scale.     Government skewed the market so that price no longer conveyed adequate information about a product – subprime mortgages.

    And, if you look at the Financial crisis from, say, Germany’s point of view it’s easy to see how a foreign government ( the US ) skewed the market and caused German banks and other investors to purchase shoddy products and lose vast amounts of money.

    Can’t it also be true that, in the steel market, a foreign government can put its thumb on the scale and by its subsidization of steel skew the market?

    • #7
  8. TES Inactive
    TES
    @TonySells

    Ekosj (View Comment):

    TES (View Comment):
    You’re not smarter than the market. Nobody is.

    Well … let’s not be so hasty. You should be right. In a free market you would be right. But … Let’s think about the financial crisis. The market was kind’a stupid then. And there certainly were people who proved to be ‘smarter than the market’.

    Why was that? Because government basically put their thumb on the scale. Government skewed the market so that price no longer conveighed adequate information about a product – subprime mortgages.

    And, if you look at the Financial crisis from, say, Germany’s point of view it’s easy to see how a foreign government ( the US ) skewed the market and caused German banks and other investors to purchase shoddy products and lose vast amounts of money.

    Can’t it also be true that, in the steel market, a foreign government can put its thumb on the scale and by its subsidization of steel skew the market?

    So your solution to the distorted market due to government intervention is more government intervention?

    That’s exactly what caused the financial crisis. It wasn’t one thing any government did. It was about 50 things governments did.

    • #8
  9. JoelB Member
    JoelB
    @JoelB

    I grew up in Pittsburgh, formerly the “Steel City”. I have heard about “dumping” for years. You will find few of the old folks in this area that believe that there ever was free trade in the steel market.

    • #9
  10. I Walton Member
    I Walton
    @IWalton

    Ekosj (View Comment):

    TES (View Comment):
    You’re not smarter than the market. Nobody is.

    Well … let’s not be so hasty. You should be right. In a free market you would be right. But … Let’s think about the financial crisis. The market was kind’a stupid then. And there certainly were people who proved to be ‘smarter than the market’.

    Why was that? Because government basically put their thumb on the scale. Government skewed the market so that price no longer conveighed adequate information about a product – subprime mortgages.

    And, if you look at the Financial crisis from, say, Germany’s point of view it’s easy to see how a foreign government ( the US ) skewed the market and caused German banks and other investors to purchase shoddy products and lose vast amounts of money.

    Can’t it also be true that, in the steel market, a foreign government can put its thumb on the scale and by its subsidization of steel skew the market?

    The market solves problems because it adjusts, distributes costs and benefits by constantly making mistakes and then correcting them.  Government can’t correct its mistakes, indeed special interests form around all government mistakes and make them unsolvable.  The alternative to markets– central direction by clever people who think they know how to fix things–does not, cannot work and always makes matters worse and through time destroys.   We cannot fix market failure through creating more controls.  Serious market failures are invariably government caused, so the solution isn’t to fix matters through more layers of control.  Rather  it is to to get as much government out of the picture as possible so that solutions emerge through time.   Protectionism whether from our neighbor’s new firm, new technology or foreign imports always leaves the country impoverished.  Where do people think  third world status comes from?  Which are the poor countries that enjoy open markets?  There are none.  Which are the poor countries that are not burdened  by protectionism?  There are none.  There are real reasons post war  imports  have caused so much pain but they’re never discussed because we go along with Democrat approaches that  are easy to sell and require no understanding..

    • #10
  11. Ekosj Member
    Ekosj
    @Ekosj

    I Walton (View Comment):
    The market solves problems because it adjusts, distributes costs and benefits by constantly making mistakes and then correcting them.

    No argument there.    That’s the way free markets work.   But we don’t have free markets in trade.   What do you do if you don’t yet have a free market?    How do you get from here to there?    And that’s the question here.    Because all the arguments about the benefits of free trade are true if and only if there are free markets and free trade.    We aren’t there.    Virtually all trade is managed.    What is our best strategy to cajole/coerce our trade counterparties to have freer trade?     Turning the other cheek is fine in things religious.     It isn’t a dominant strategy in game theory and strategic behavior.

    • #11
  12. Ekosj Member
    Ekosj
    @Ekosj

    TES (View Comment):
    So your solution to the distorted market due to government intervention is more government intervention?


    Sometimes you fight fire with fire.  Sometimes you have to fight to get peace.     We want freer markets and freer trade.     How do you get that?     Turning the other cheek is not a dominant strategy in game theory.

     

    • #12
  13. Boss Mongo Member
    Boss Mongo
    @BossMongo

    Outstanding perspective/data point.  Thank you, Mr. Brown.

    • #13
  14. TES Inactive
    TES
    @TonySells

    Ekosj (View Comment):

    TES (View Comment):
    So your solution to the distorted market due to government intervention is more government intervention?


    Sometimes you fight fire with fire. Sometimes you have to fight to get peace. We want freer markets and freer trade. How do you get that? Turning the other cheek is not a dominant strategy in game theory.

    If we institute tariffs, that hurts us. Some Americans MIGHT see a benefit, but far more will be hurt and lose their jobs.

    “Fighting fire with fire” would not include taxing our own citizens and driving up the prices of goods.  That would be counterproductive. Why should we tax our citizens just because other countries tax theirs?

    It would be better for us if they didn’t tax their people and allow them to become richer, but lets do what is best for our country.  Call it an “America First” agenda and not tax our people.

    • #14
  15. Ekosj Member
    Ekosj
    @Ekosj

    TES (View Comment):
    Fighting fire with fire” would not include taxing our own citizens and driving up the prices of goods. That would be counterproductive. Why should we tax our citizens just because other countries tax theirs?

    Don’t think of it as ‘taxing our citizens’ think of it as removing the subsidization from the price. We believe in market prices.    Fine.    Here is what the price would be – should be – if it weren’t for the subsidy that is artificially skewing/lowering the price.

    • #15
  16. I Walton Member
    I Walton
    @IWalton

    Ekosj (View Comment):

    I Walton (View Comment):
    The market solves problems because it adjusts, distributes costs and benefits by constantly making mistakes and then correcting them.

    No argument there. That’s the way free markets work. But we don’t have free markets in trade. What do you do if you don’t yet have a free market? How do you get from here to there? And that’s the question here. Because all the arguments about the benefits of free trade are true if and only if there are free markets and free trade. We aren’t there. Virtually all trade is managed. What is our best strategy to cajole/coerce our trade counterparties to have freer trade? Turning the other cheek is fine in things religious. It isn’t a dominant strategy in game theory and strategic behavior.

    It’s always possible to make a case why the government should fix some problem, there are a lot of clever people ready and able to make the case, but it never works out well because it can’t.  There are too many variables and we will never have the data necessary to manage even small parts of the economy because such information can’t exist.  (See Hayek) How do you get from here to there?  Absolutely not by doubling down on centralizing control that will be crafted by special interests then frozen into place.   Our counterparts harm themselves through protectionism.  What the Japanese, Chinese, Koreans discovered is that they can poach proven commercial success, adopt the technology, then flood our markets pretty much risk free.     Some of it is dumping and we have anti dumping laws when we can prove it, which isn’t often, some of it is currency, in that the dollar is overvalued and, since the dollar is the world’s trading and intervention currency we can’t devalue.  We could adopt an across the board uniform tariff on all countries and all goods.  Such a tariff would be the equivalent of a devaluation, would raise revenue and hence help close our current account deficit.  I think it would be GATT legal (use of GAtt shows my age)  We could further deregulate, simplify and replace taxes on income, savings and work with taxes on consumption.    That would also reduce our current account deficit.  And we could cut government spending.  All these things work in the right direction.  Protectionism and further centralized controls cannot.

    • #16
  17. TES Inactive
    TES
    @TonySells

    Ekosj (View Comment):

    TES (View Comment):
    Fighting fire with fire” would not include taxing our own citizens and driving up the prices of goods. That would be counterproductive. Why should we tax our citizens just because other countries tax theirs?

    Don’t think of it as ‘taxing our citizens’ think of it as removing the subsidization from the price. Yer believe in market prices. Fine. Here is what the price would be – should be – if it weren’t for the subsidy that is artificially skewing/lowering the price.

    It’s called a tax because it is a tax.  Not only will imported goods prices go up, but also the prices of domestic goods.

    If a country is stupidly subsidizing our consumption, we should take that subsidy all day long.  Again, a lot more people work in the steel consumption industries than the steel production industries.  It can hurt the folks  who work in those industries, and we should do what we can to retrain and allow them to find employment, but you are helping far more people by taking the foreign country’s subsidy and creating jobs in other industries.

    I want to make one final point.  The reduction in jobs in the steel industry is only partially due to trade.  In 1980 it took 10 men to do the work of 1 man today.  We are producing about the same amount of steel now that we did then, we just do it with fewer people.  We have to do a much better job of helping affected workers of trade, but mostly innovation to find gainful employment, but tariffs would take us in the opposite direction.

    • #17
  18. Ekosj Member
    Ekosj
    @Ekosj

    I Walton (View Comment):
    Our counterparts harm themselves through protectionism. What the Japanese, Chinese, Koreans discovered is that they can poach proven commercial success, adopt the technology, then flood our markets pretty much risk free

    These two sentences are in direct opposition to each other.    Apparently they are benefiting asymmetrically from  a nonfree market /nonfree trade environment

    You are making a free market argument about an environment where there aren’t free markets or free trade.   I’d agree with wholeheartedly if we were in a free trade/free market environment like ‘trade’ between the 50 States. But we are talking about markets and trade that is already heavily manipulated/managed/regulated and where others are benefiting at our expense.

    • #18
  19. Ekosj Member
    Ekosj
    @Ekosj

    TES (View Comment):

    Ekosj (View Comment):

    TES (View Comment):
    Fighting fire with fire” would not include taxing our own citizens and driving up the prices of goods. That would be counterproductive. Why should we tax our citizens just because other countries tax theirs?

    Don’t think of it as ‘taxing our citizens’ think of it as removing the subsidization from the price. Yer believe in market prices. Fine. Here is what the price would be – should be – if it weren’t for the subsidy that is artificially skewing/lowering the price.

    It’s called a tax because it is a tax. Not only will imported goods prices go up, but also the prices of domestic goods.

    If a country is stupidly subsidizing our consumption, we should take that subsidy all day long. Again, a lot more people work in the steel consumption industries than the steel production industries. It can hurt the folks who work in those industries, and we should do what we can to retrain and allow them to find employment, but you are helping far more people by taking the foreign country’s subsidy and creating jobs in other industries.

    I want to make one final point. The reduction in jobs in the steel industry is only partially due to trade. In 1980 it took 10 men to do the work of 1 man today. We are producing about the same amount of steel now that we did then, we just do it with fewer people. We have to do a much better job of helping affected workers of trade, but mostly innovation to find gainful employment, but tariffs would take us in the opposite direction.

    Let’s take this line of reasoning to its logical conclusion.

    If manipulated, artificially low prices are such a boon to our economy and consumers, let’s just subsidize our own industries.   Is that an argument you want to make?

    Market pricing is a good thing because it accurately directs the allocation of scarce resources.    Subsidized prices are bad in and of themselves, not depending on whose doing the subsidizing.

    • #19
  20. Jack Hendrix Inactive
    Jack Hendrix
    @JackHendrix

    I’m certainly no impartial observer but the free traders are thrashing the…fair traders? Is that the proper nomenclature? Anyhow, the best argument for the fair trade crew is to ignore the economics and just go all emotion and politics. People like tariffs and I don’t think it’s just because Trump said so. (Though there are plenty of people who happily reversed their positions thanks to him) Just own it.

    • #20
  21. Joe P Member
    Joe P
    @JoeP

    Ekosj (View Comment):
    You are making a free market argument about an environment where there aren’t free markets or free trade. I’d agree with wholeheartedly if we were in a free trade/free market environment like ‘trade’ between the 50 States. But we are talking about markets and trade that is already heavily manipulated/managed/regulated and where others are benefiting at our expense.

    No, the Chinese producers are benefitting at the expense of the Chinese consumer, and the American consumer is benefitting from having a choice between the American producers and Chinese producers.

    Even ignoring this typical categorical error in thought, this logic of “we’re not in a free market, so we have to double down on the non-freedom” is highly erroneous. Do you apply this logic to Idaho potatoes, California beef, or Wisconsin cheese? They’re all subsidized by their state governments. Should Massachusetts impose a tax on Wisconsin cheese in the hope of creating jobs for milkmaids?

    • #21
  22. Ekosj Member
    Ekosj
    @Ekosj

    Jack Hendrix (View Comment):
    I’m certainly no impartial observer but the free traders are thrashing the…fair traders? Is that the proper nomenclature? Anyhow, the best argument for the fair trade crew is to ignore the economics and just go all emotion and politics. People like tariffs and I don’t think it’s just because Trump said so. (Though there are plenty of people who happily reversed their positions thanks to him) Just own it.

    Not ignoring economics JH.    Embracing it.     The economics of the free trade argument come with an asterisk.    They hold if and only if there are free markets and unencumbered trade.    If you want to own the economics you have to own it asterisk and all.    So.    What about trade in markets that aren’t free and fair?     Can there be asymmetric benefits to less-than-free trade in those conditions?     Why yes there can be!      And which set of conditions do we find ourselves in?     Are international markets free and unencumbered?

    • #22
  23. Joe P Member
    Joe P
    @JoeP

    Jack Hendrix (View Comment):
    I’m certainly no impartial observer but the free traders are thrashing the…fair traders? Is that the proper nomenclature?

    The formal term would be “protectionist.” Though “mercantilist” may also apply depending on the exact argument being used. “Fair trade” is a recent term that’s been used by a number of different, non-overlapping agendas and should probably be avoided because it muddles what the reasoning is. Which is actually the point of it, because these ideas have been considered intellectually bankrupt in nearly every school of economics for the past hundred years.

    Anyhow, the best argument for the fair trade crew is to ignore the economics and just go all emotion and politics. People like tariffs and I don’t think it’s just because Trump said so. (Though there are plenty of people who happily reversed their positions thanks to him) Just own it.

    Is this meant as an actual suggestion? I mean, you could make the same argument for communism, but that doesn’t make communism a good idea.

    • #23
  24. Quake Voter Inactive
    Quake Voter
    @QuakeVoter

    The tariffs don’t make much economic sense.  They are political payback for Trump’s base in the industrial Midwest.  Of course, we have to listen to the virtue signalling of all the free traders who were supportive or remained silent when Reagan imposed them, Bush imposed them and Romney based his campaign in the Midwest on getting tough with China (in the Southwest it was self-deportation).

    Take a look through our Harmonized Tariff Schedule to see what a free trading nation we are.  25% on pickups.  40% on vegetables.  Take a look at sugar!

    Nice gig for Scott Lincicome to play a free trader on TV and spend his days collecting $1000/hr to navigate our vast tariff regime.

    Hey, it’s no argument against free trade (I’d support a throwing open Hong Kong style) but the animus directed against Trump is so patently stage managed.

    • #24
  25. Ekosj Member
    Ekosj
    @Ekosj

    Joe P (View Comment):
    Which is actually the point of it, because these ideas have been considered intellectually bankrupt in nearly every school of economics for the past hundred years.

    You ignore the assumptions built into the Ricardian free trade analysis.    What happens if those assumptions don’t hold?    Ricardo is right … if and only I’d there are free markets and ubencumbered trade.    He is silent on what optimal strategies are in a non free market environment.    The real world is messier than David Ricardo’s drawing room.

    • #25
  26. Joe P Member
    Joe P
    @JoeP

    Quake Voter (View Comment):
    Of course, we have to listen to the virtue signalling of all the free traders who were supportive or remained silent when Reagan imposed them, Bush imposed them and Romney based his campaign in the Midwest on getting tough with China (in the Southwest it was self-deportation).

    I was two years old when Reagan imposed tariffs, had nobody to talk to about how bad Bush’s tariffs were besides my Dad, and said on Twitter that I thought Romney’s talk about “getting tough with China” was really dumb pandering during the 2012 primary race.

    Given that I’m incredibly consistent on this topic even when there is nobody present for me to signal virtue to, is my opposition to this awful idea “stage managed”?

    • #26
  27. Joe P Member
    Joe P
    @JoeP

    Ekosj (View Comment):

    Joe P (View Comment):
    Which is actually the point of it, because these ideas have been considered intellectually bankrupt in nearly every school of economics for the past hundred years.

    You ignore the assumptions built into the Ricardian free trade analysis. What happens if those assumptions don’t hold? Ricardo is right … if and only I’d there are free markets and ubencumbered trade.

    You keep asserting that as a given. Could you actually prove that, please?

    He is silent on what optimal strategies are in a non free market environment. The real world is messier than David Ricardo’s drawing room.

    That may be true, but there is no reason to believe that the optimal strategy is “shoot yourself in the head because the other kids are doing it.”

    • #27
  28. Jack Hendrix Inactive
    Jack Hendrix
    @JackHendrix

    Hey Joe P,

    My comment was a bit sarcastic, but only a bit. I’m liberal (classically) on trade so I find the whole fair trade argument disingenuous and wrong empirically. But I do think there is a political argument to be made, even if it’s not one I totally agree with. Governments pick winners and losers all the time, at least they try to. So I say to the protectionists, just ditch the economic theory justification since it is weak and instead say it’s really important to pick this particular winner. That way we can be spared this whole “it’s not fair” jazz masquerading as a devastating critique of free trade. The protectionists are almost there anyhow, I’m just giving them an extra nudge.

    • #28
  29. Z in MT Member
    Z in MT
    @ZinMT

    TES (View Comment):
    I want to make one final point. The reduction in jobs in the steel industry is only partially due to trade. In 1980 it took 10 men to do the work of 1 man today. We are producing about the same amount of steel now that we did then, we just do it with fewer people. We have to do a much better job of helping affected workers of trade, but mostly innovation to find gainful employment, but tariffs would take us in the opposite direction.

    This is the most important point. We produce just as much steel now as we did in 1980, with 10 times fewer workers. 70% of the steel used in the US is from domestic production. That means even if we put an embargo on steel imports, we would not even double the number of steel producing jobs in the US and still have 87% less steel jobs than in 1980.

    The biggest problem is that Fox News and Talk Radio have convinced a large fraction of Americans that the US imports >90% of the steel we use in the US.

    • #29
  30. ST Inactive
    ST
    @SimonTemplar

    TES (View Comment):
    If a country is stupidly subsidizing our consumption, we should take that subsidy all day long.

    T.H.I.S.

    • #30
Become a member to join the conversation. Or sign in if you're already a member.