Trump and American Steel: Another Story of Economic Nostalgia

 
Bethlehem Steel

Blast furnaces at the now-closed Bethlehem Steel mill in Bethlehem, PA.

Given that Donald Trump gave his big trade-bashing economic speech in Pennsylvania, it’s not so surprising he talked about steel. American steel, dadgummit! Here’s Trump:

A Trump Administration will also ensure that we start using American steel for American infrastructure. Just like the American steel from Pennsylvania that built the Empire State building. It will be American steel that will fortify American’s crumbling bridges. It will be American steel that sends our skyscrapers soaring into the sky. It will be American steel that rebuilds our inner cities. It will be American hands that remake this country, and it will be American energy – mined from American resources – that powers this country. It will be American workers who are hired to do the job. We are going to put American-produced steel back into the backbone of our country. This alone will create massive numbers of jobs.

So this was, I guess, both an attack on subsidized Chinese steel and a “buy American” pitch.

Now the entire US steel industry directly employs just 142,000 American workers, according to the American Iron and Steel Institute. Or only twice the headcount of Apple alone.

Which is not to say it is an insignificant industry. The US steel industry is the world’s fourth-largest. Indeed, the total value-added output of the entire US metal manufacturing industry is some $60 billion, employing some 400,000 workers.

But here’s the thing: the manufacturers that use steel generate nearly $1 trillion in value-added output, according to the Cato Institute, using government data. And they employ some 6.5 million people. What’s more, as Cato argues, “low-priced steel imports provide a substantial net benefit to the US economy” as an input to other manufacturing. This is a good thing for most American manufacturing and is in effect a net transfer of wealth to the US from China.

More from Keith Hennessey:

Steel is an intermediate good. When you raise protectionist barriers against imported steel as Mr. Trump threatens, you temporarily help U.S. steelworkers. You also raise input prices for American firms that use steel to build bridges and buildings and make cars, and trucks, trains and train tracks, appliances, ships, farm equipment, drilling rigs and power plants, and tools and packaging. Higher input costs hurt American workers in those factories and on those construction sites.

Mr. Trump should ask the workers who make dishwashers at Whirlpool’s plant in Findlay, Ohio whether they’re in favor of more expensive steel. Or he can ask the John Deere workers who use steel at their factories in Iowa, Kansas, Louisiana, North Carolina, North Dakota, Tennessee, and Wisconsin. Or the auto workers at almost any U.S. car and truck assembly line. Raising prices for imported steel hurts all of these American workers.

The New York Times offers some value-added insight of its own on the long-term decline of American steel manufacturing, not forgetting the role of automation and technological progress as Trump typically does:

[Trump] is right that the number of steel industry jobs — more precisely “iron and steel mills and ferroalloy manufacturing,” in government data-speak — is down by 44 percent in the Pittsburgh area since 1990, a span in which the United States entered the North American Free Trade Agreement and engaged in much more extensive trade with China.

But two things are worth knowing. Before Nafta was even a gleam in a trade negotiator’s eye, Pittsburgh had already lost the biggest chunk of its steelworking jobs. The culprit in that era was both international competition and the introduction of mini-mills, which allowed the production of steel with far fewer man-hours. Because of that and other technological innovations that improved productivity, total American steel output is about the same now as it was in 1990, even with far fewer workers.

That steep contraction in steel production jobs has been more than counterbalanced by a rise in other types of work. The 5,100 steel production jobs lost in Pittsburgh are dwarfed by the 66,000 health care jobs gained in the same time span. Pittsburgh has often been viewed as the very model of a city moving beyond its heavy industrial history to find new prosperity in areas like health care, banking, and professional services.

Published in Economics
Like this post? Want to comment? Join Ricochet’s community of conservatives and be part of the conversation. Join Ricochet for Free.

There are 37 comments.

Become a member to join the conversation. Or sign in if you're already a member.
  1. Big Green Inactive
    Big Green
    @BigGreen

    Agree with this analysis for the most part.  Only quibble would be with the health care jobs.  Yes, those have increased massively but many of those jobs are not long term sustainable.  The demographics in Pittsburgh are skewed to the older side and the “demand” for healthcare services is likely to decrease meaningfully in the next 10-15 years.

    • #1
  2. CandE Inactive
    CandE
    @CandE

    Apparently, since the 80’s most US manufactured steel is almost entirely recycled.  If you want “virgin” steel, you have to get it outside the country.  The only reason I know that is that recycled steel has high “residual element” content which appears to be associated with higher failure rates of piping in for HF alkylation process units.  While not everyone in the industry has recognized this issue (ExxonMobil is not yet convinced), the trend is definitely moving towards “low RE” piping.  Fortunately, this only applies to HF alkylation; not even sulfuric acid alkylation seems affected by it.

    -E

    • #2
  3. Frozen Chosen Inactive
    Frozen Chosen
    @FrozenChosen

    I hate to agree with the NYT but the fact remains that technology has greatly increased efficiency in all areas of manufacturing – including steel making – that has greatly reduced the number of people needed to produce products.

    A very under-reported story is that there are thousands of specialized, good paying manufacturing jobs waiting to be filled by people who are willing to undergo a year or two of vocational training to qualify. They may not be in your hometown but no one can bring the mill back where your grandfather worked, not even the great Donald.  So you may have to move but there are worse things in life – like wasting away on welfare or disability.

    • #3
  4. Nick Stuart Inactive
    Nick Stuart
    @NickStuart

    What do you think of Clinton’s trade policies? It will be Trump or Clinton dealing with trade, etc. Who do you prefer?

    • #4
  5. PHCheese Inactive
    PHCheese
    @PHCheese

    I grew up in Pittsburgh. I lived through the demise of the steel industry. Trump is just recycling BS. The steel industry is for all intents and purposes gone in that area and will never come back. China has three times the excess capacity as US Steel Corp has capacity.  They have lost 1.5 billion in 2015 and are continuing to lose at that pace. This is a company with a market capitalization of 2.6 billion.That is just China capacity.The inter structure no longer exists in Pittsburgh and can’t be rebuilt.   There is no longer even a labor pool that would work in the mills . That took real men.Where steel mills once lined the rivers there are now condos ,malls , marinas , hospitals, and movie theaters. Also people would no longer put up with the negative aspects such as air and water, noise pollution. The area has moved on so should Trump. He sounds  ridiculous .

    • #5
  6. Percival Thatcher
    Percival
    @Percival

    This was once the second largest steel plant in the U.S. It closed in 1936.

    I don’t think they’ll be flipping the switch any time soon.ussteel

    • #6
  7. hokiecon Inactive
    hokiecon
    @hokiecon

    Trump is seeing the economy through a nostalgic lens, and I don’t agree with his trade stance, but I’ll sure as hell take him over what Hillary has to offer.

    • #7
  8. Seawriter Contributor
    Seawriter
    @Seawriter

    In 1890 farmers were 43% of the labor workforce in the United States. In 1990 they were just 2%.

    In 1950 34% of all jobs were in manufacturing, Today it is closer to 9%. Anyone want to bet on when it hits 2%?

    Jobs shift. The idea “bringing manufacturing back to the USA” is going to create new manufacturing jobs is an opium dream. Jobs are coming back to the US because the US can produce cheaper than other nations due to high productivity (robotics) and low energy costs (fracking). As labor is freed up from one sector it shifts to another. Could the farmer of 1890 dreamed of the jobs market of 1990?

    Seawriter

    • #8
  9. PHCheese Inactive
    PHCheese
    @PHCheese

    hokiecon:Trump is seeing the economy through a nostalgic lens, and I don’t agree with his trade stance, but I’ll sure as hell take him over what Hillary has to offer.

    It’s just sad that those are our only options. Do they have to be? This is America ,can’t we do something about this?

    • #9
  10. PHCheese Inactive
    PHCheese
    @PHCheese

    Big Green:Agree with this analysis for the most part. Only quibble would be with the health care jobs. Yes, those have increased massively but many of those jobs are not long term sustainable. The demographics in Pittsburgh are skewed to the older side and the “demand” for healthcare services is likely to decrease meaningfully in the next 10-15 years.

    Yes , it is true about the demographics not being long term sustainable but again what jobs truly are.

    • #10
  11. PHCheese Inactive
    PHCheese
    @PHCheese

    CandE:Apparently, since the 80’s most US manufactured steel is almost entirely recycled. If you want “virgin” steel, you have to get it outside the country. The only reason I know that is that recycled steel has high “residual element” content which appears to be associated with higher failure rates of piping in for HF alkylation process units. While not everyone in the industry has recognized this issue (ExxonMobil is not yet convinced), the trend is definitely moving towards “low RE” piping. Fortunately, this only applies to HF alkylation; not even sulfuric acid alkylation seems affected by it.

    -E

    It’s the steel recyclers that are anywhere near profitable. The virgin mfg. are bleeding money like USS. They are all saddled with legacy costs they can’t seem to shed. There are some niche products that are profitable like some stainless products. I am not knowledgeable about the quality aspect of recycled vs virgin. I am just slightly more knowledgeable about the process. It is an order of magnitude more complicated to make virgin steel vs made from scrap steel.

    • #11
  12. PHCheese Inactive
    PHCheese
    @PHCheese

    Frozen Chosen:I hate to agree with the NYT but the fact remains that technology has greatly increased efficiency in all areas of manufacturing – including steel making – that has greatly reduced the number of people needed to produce products.

    A very under-reported story is that there are thousands of specialized, good paying manufacturing jobs waiting to be filled by people who are willing to undergo a year or two of vocational training to qualify. They may not be in your hometown but no one can bring the mill back where your grandfather worked, not even the great Donald. So you may have to move but there are worse things in life – like wasting away on welfare or disability.

    You are completely correct. My grandfather left Ireland in 1890 to come to Pittsburgh for a job. I have two children in Charleston SC for business and one who lives in  Raleigh and flys all over the country for business. He is commuting 4000 miles a week now. It took my grandfather 30 days to come from Ireland. He would be flabbergasted.

    • #12
  13. Mister D Inactive
    Mister D
    @MisterD

    Frozen Chosen:I hate to agree with the NYT but the fact remains that technology has greatly increased efficiency in all areas of manufacturing – including steel making – that has greatly reduced the number of people needed to produce products.

    A very under-reported story is that there are thousands of specialized, good paying manufacturing jobs waiting to be filled by people who are willing to undergo a year or two of vocational training to qualify. They may not be in your hometown but no one can bring the mill back where your grandfather worked, not even the great Donald. So you may have to move but there are worse things in life – like wasting away on welfare or disability.

    Chemistry teacher humbly bows before you.

    • #13
  14. Seawriter Contributor
    Seawriter
    @Seawriter

    PHCheese: I am just slightly more knowledgeable about the process. It is an order of magnitude more complicated to make virgin steel vs made from scrap steel.

    There is a lot of scrap steel around. If you do not reuse it, it just lays around useless. It also take a lot less energy to recycle it.

    The mini-mills (like Nucor Steel) are highly profitable. They recycle steel. It takes less energy to make steel from scrap, and they have a consistent high quality.  They tend to be union-free but pay well and use low energy methods to produce steel. What’s not to like?

    Seawriter

    • #14
  15. Seawriter Contributor
    Seawriter
    @Seawriter

    There are a lot of manufacturing jobs near where I live in the form of petroleum processing – refineries and plastics. When feedstock prices are low, these companies boom. Entry-level jobs pay between $40K-65K. You need an associates (which you can get from several local junior colleges), and each plant has relatively few employees (as compared to the Ford Rouge Plant circa 1940 or Bethlehem Steel circa 1950).

    That is one reason wages are so high. It is capital intensive so you do not want to skimp on worker quality. Get cheap workers and you risk your investment in the plant.

    Seawriter

    • #15
  16. PHCheese Inactive
    PHCheese
    @PHCheese

    Seawriter:

    PHCheese: I am just slightly more knowledgeable about the process. It is an order of magnitude more complicated to make virgin steel vs made from scrap steel.

    There is a lot of scrap steel around. If you do not reuse it, it just lays around useless. It also take a lot less energy to recycle it.

    The mini-mills (like Nucor Steel) are highly profitable. They recycle steel. It takes less energy to make steel from scrap, and they have a consistent high quality. They tend to be union-free but pay well and use low energy methods to produce steel. What’s not to like?

    Seawriter

    Yes SEAWRITER everything you say is correct except perhaps the highly profitable part. All American mfgs are suffering. Actually my daughters significant other works for Nucor here in Charleston. He actually works for min. wage plus incentives. He plans on being able to retire at 50 because he has done so well. However the last couple of years have not been as  lucrative . Again I can’t really talk about the quality especially in niche markets. High quality rebar probably isn’t the same as say high quality bridge spans or such. I would reference Candi comment about piping which I don’t know much about.

    • #16
  17. kgrant67 Inactive
    kgrant67
    @kgrant67

    Thought experiment here.  If Trump were President and Rearden Metal came out, would he move to have it banned to protect the steel industry?

    • #17
  18. PHCheese Inactive
    PHCheese
    @PHCheese

    kgrant67:Thought experiment here. If Trump were President and Rearden Metal came out, would he move to have it banned to protect the steel industry?

    Interesting indeed.

    • #18
  19. Randy Weivoda Moderator
    Randy Weivoda
    @RandyWeivoda

    kgrant67:Thought experiment here. If Trump were President and Rearden Metal came out, would he move to have it banned to protect the steel industry?

    As I recall, Rearden Metal used copper imported from South America so that would probably be on the naughty list.

    • #19
  20. I Walton Member
    I Walton
    @IWalton

    Everything Trump says about trade is utter nonsense.  He’s a progressive Democrat on all of it, but he’s not Hillary, he’s not a Democrat  and is unlikely to name progressives to the supreme court.  We have to hope he’ll have adults in his cabinete and that he’ll listen to people who actually know somthing.   If not, it will be a long and interesting four years.  But that is better than progressives in perpetuity.

    • #20
  21. Big Green Inactive
    Big Green
    @BigGreen

    PHCheese:

    Big Green:Agree with this analysis for the most part. Only quibble would be with the health care jobs. Yes, those have increased massively but many of those jobs are not long term sustainable. The demographics in Pittsburgh are skewed to the older side and the “demand” for healthcare services is likely to decrease meaningfully in the next 10-15 years.

    Yes , it is true about the demographics not being long term sustainable but again what jobs truly are.

    True, nothing is forever (except maybe diamonds…) but the continuation of the demographic trend in Pittsburgh is a near certainty as it relates to all the healthcare jobs. It isn’t a situation where an industry is at risk or subject to disruptive innovation that is uncertain. There will be meaningful decline in demand for healthcare services in Pittsburgh in the not too distant future

    • #21
  22. CandE Inactive
    CandE
    @CandE

    PHCheese: Also people would no longer put up with the negative aspects such as air and water, noise pollution.

    Not to mention safety.

    Used to be that Geneva Steel was one of the biggest industrial facilities in Utah valley.  It employed thousands, not to mention all the other jobs required to provide services to those well paid workers.  However, it also resulted in horrible air quality for the entire region.  Now GS is a shell of its former self, its jobs replaced by Micron, Intel, etc., and we can all breathe fresh air.

    Of course, it is a dearth of blue collar jobs and that can be a problem.  However, I don’t know many people around here who want it to go back to the way it was.

    -E

    • #22
  23. CandE Inactive
    CandE
    @CandE

    PHCheese:

    CandE:Apparently, since the 80’s most US manufactured steel is almost entirely recycled. If you want “virgin” steel, you have to get it outside the country. The only reason I know that is that recycled steel has high “residual element” content which appears to be associated with higher failure rates of piping in for HF alkylation process units. While not everyone in the industry has recognized this issue (ExxonMobil is not yet convinced), the trend is definitely moving towards “low RE” piping. Fortunately, this only applies to HF alkylation; not even sulfuric acid alkylation seems affected by it.

    -E

    It’s the steel recyclers that are anywhere near profitable. The virgin mfg. are bleeding money like USS. They are all saddled with legacy costs they can’t seem to shed. There are some niche products that are profitable like some stainless products. I am not knowledgeable about the quality aspect of recycled vs virgin. I am just slightly more knowledgeable about the process. It is an order of magnitude more complicated to make virgin steel vs made from scrap steel.

    Oh, I don’t disagree.  I’m not suggesting that recycled steel is inferior because it generally isn’t (aside from that specific application).  Rather, my point is just to illustrate that the steel industry went from processing ore to recycling scrap, which means it’s an entirely different industry than the Allentown-esque memory that it once was.

    -E

    • #23
  24. Xennady Member
    Xennady
    @

    It’s always fascinating for me to watch all the people here who can’t see the forest because of all the tree branches that keep smacking them in the face.

    Donald Trump is attempting to get elected President of the United States. He is not giving a lecture on economics to college freshmen. He is not explaining to his soon to be unemployed workforce that their termination is merely a business decision. He is not discussing matters that people believe should be left to their betters in Washington, DC.

    He is talking about policy questions that the electorate of the United States cares very much about, because they are affected personally. The public widely believes that the people making decisions for the country have made the wrong ones.

    As evidence, I note that Trump is the Republican nominee for President, despite the relentless hysterical flailing from his opponents in the GOP.

    I take this as a sign that something has gone seriously wrong with American governance- and no, it isn’t that people don’t understand that they should be happy to have lost their jobs.

    As a former employee of a steel company, I’ve seen firsthand many of the reasons why these companies went under. But I also recall reading, long ago, an editorial from the Heritage Foundation arguing that the US government had no moral right to favor American steelworkers over foreigners.

    • #24
  25. Xennady Member
    Xennady
    @

    Left unsaid was why that government had a moral right to tax Americans, or send them to die in Iraq. Or Vietnam, where many of my former coworkers had served.

    The GOP is a political party. Political. The game it is playing is politics, not economics. It does not exist to lecture the public about economics. It exists to win elections- and, subsequently, successfully govern the United States, which means that the mass of people living in it are doing well, and believe such, so much so that they continue to vote for the GOP in the next election. I consider this the key goal of successful governance.

    This seems rather obvious to me, but I am continuously astonished by how much discussion of economics I see here, and how little of politics. As I figure this is a thoroughly establishment site, I also take that as a sign that the GOP establishment is hopelessly out of touch with the electorate.

    Which is why a loudmouth former reality TV star managed  to win the nomination, just by running his mouth- and why I’m not surprised by that.

    Politics, the game is politics.

    • #25
  26. Fake John/Jane Galt Coolidge
    Fake John/Jane Galt
    @FakeJohnJaneGalt

    kgrant67:Thought experiment here. If Trump were President and Rearden Metal came out, would he move to have it banned to protect the steel industry?

    It would depend if it made the country better and thus DJT look better or made DJT more money.

    • #26
  27. Lazy_Millennial Inactive
    Lazy_Millennial
    @LazyMillennial

    Xennady: The GOP is a political party. Political. The game it is playing is politics, not economics. It does not exist to lecture the public about economics. It exists to win elections- and, subsequently, successfully govern the United States, which means that the mass of people living in it are doing well, and believe such, so much so that they continue to vote for the GOP in the next election. I consider this the key goal of successful governance.

    For the mass of people to do well, the election winners must implement good economic policies. For election winners to implement good economic policies, the public has to favor those policies. Gathering public support for good economic policies is a precondition of governing well. Examples:

    W. Bush won re-election in 2004 but didn’t have popular support for reforming Social Security. He was unable to reform Social Security.

    Obama won election in 2008 but didn’t have popular support for reforming healthcare. He rammed through Obamacare, lost Congress, nearly lost the Presidency, and spent the rest of his Presidency severely limited in how much policy he could implement.

    The alternative you’re proposing seems to be, “tell the people what they want to hear [bad policies], then implement good policies [that the public dislikes], then the public will come around and re-elect you.” In addition to lying to the public about intentions, this strategy implies elected officials knowing good policies from bad and a public that “comes around.”

    • #27
  28. Big Green Inactive
    Big Green
    @BigGreen

    Xennady:It’s always fascinating for me to watch all the people here who can’t see the forest because of all the tree branches that keep smacking them in the face.

    Donald Trump is attempting to get elected President of the United States. He is not giving a lecture on economics to college freshmen. He is not explaining to his soon to be unemployed workforce that their termination is merely a business decision. He is not discussing matters that people believe should be left to their betters in Washington, DC.

    He is talking about policy questions that the electorate of the United States cares very much about, because they are affected personally. The public widely believes that the people making decisions for the country have made the wrong ones.

    As evidence, I note that Trump is the Republican nominee for President, despite the relentless hysterical flailing from his opponents in the GOP.

    As a former employee of a steel company, I’ve seen firsthand many of the reasons why these companies went under. But I also recall reading, long ago, an editorial from the Heritage Foundation arguing that the US government had no moral right to favor American steelworkers over foreigners.

    So for folks that have historically supported the GOP but disagree with the efficacy of the economic and trade policies being espoused by the presumptive GOP nominee, they should do exactly what? Say nothing?  Not discuss those policies and their reason for disagreement?

    • #28
  29. Frozen Chosen Inactive
    Frozen Chosen
    @FrozenChosen

    Xennady:Donald Trump is attempting to get elected President of the United States. He is not giving a lecture on economics to college freshmen. He is not explaining to his soon to be unemployed workforce that their termination is merely a business decision. He is not discussing matters that people believe should be left to their betters in Washington, DC.

    He is talking about policy questions that the electorate of the United States cares very much about, because they are affected personally. The public widely believes that the people making decisions for the country have made the wrong ones.

    So it’s ok for him to lie to people and tell them what they want to hear?  I thought that is what the Democrats did?

    If we have a country of children who cannot abide the truth than we are doomed.  Giving people false hopes by telling them that their obsolete job is coming back only increases the cynicism of people since Trump has no chance of making that happen.

    You call him a politician – I call him a huckster.  He really should have run as a liberal Democrat since that is what he is.

    • #29
  30. Seawriter Contributor
    Seawriter
    @Seawriter

    Frozen Chosen: So it’s ok for him to lie to people and tell them what they want to hear? I thought that is what the Democrats did?

    Trump is a Democrat, even if he is running as a Republican.

    Seawriter

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