President Trump's decision to impose 25 percent tariff on foreign steel, and 10 percent on foreign aluminum was not a surprise for those who followed his campaign rhetoric.
But Ohio State University economist Ned Hill was surprised by *how* the President announced the decision, without perhaps considering all of the repercussions.
He says one of the benefits of free trade is forcing industries to become more competitive on the international market, which is ultimately what happened to the steel industry.
鈥淭he industry in a very painful way had to downsize and get productive to meet international competition, and it鈥檚 reached a new level of equilibrium as a result,鈥� Hill said. 鈥淢ost of your listeners aren鈥檛 going to believe the fact that the United States produces 75% of the steel that we consume today.鈥�
Hill says he agrees with the President that communities have been left behind as the economy has shifted, and that an infrastructure bill requiring more domestic steel, may be the way to create a bounce.
More from the interview
鈥�on giving exemptions to Canada and Mexico:
鈥淓mpirically it lessens the severity. Canada is our largest foreign steel supplier, Mexico is down around fifth place. But the important thing is it would minimize the disruption in the supply chain to both the North American automobile and appliance industries.鈥�
鈥�on Arcelor Mittal in Cleveland:
鈥淪ince the Arcelor Mittal plant makes finish-grade, automotive steel, it will not cause any disruption with their customers, but it also means some of their Canadian competitors for finish-grade steel will still be able to compete with them on equal price footing.鈥�
鈥�on considerations for making products that need steel:
鈥淎bout six weeks or so ago the chairman of Toyota was down in Georgetown, KY, challenging the Toyota associated to get the price down on the Camry, because right now it鈥檚 cheaper to produce the Camry in Japan and ship it to the United States than produce it in Georgetown. Honda and Toyota, both of which have important supply chain presence in the state of Ohio, are going to have to consider where they鈥檙e going to make their automobiles. The same way in which Whirlpool, which just got a judgement against LG, their largest investment鈥檚 actually in Ohio in Clyde and in Marion, and this may wipe out their cost advantage.鈥�
鈥�on impact on China:
鈥淪teel will still come into the United States from China, it will just come in from China in the form of finished goods. When you buy a bicycle that鈥檚 frame has been assembled in China, that bicycle is bringing in Chinese steel. And they don鈥檛 even make the top 10 list, and the reason is the WTO process worked. There have been so many judgements against China, that they are not bringing steel into the United States鈥here was very little understanding of how the economy works in this decision.鈥�
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