Thursday, March 22, 2018

Half Million Dollar Steel Jobs?

The steel and aluminum tariffs just announced represent a barrier to entry for foreign firms. On the up-side, they are claimed to generate 19,000 steel worker jobs.* On the down-side, steel costs will go up. By how much? A na├»ve estimate would multiply the 25% tariff by $70.6 billion in US steel sales to yield $17.6 billion in additional annual costs. This yields just short of $1 million per steel industry job generated. But steel workers earn about $52,000 per year, not bad but no where near $1 million. A more precise price estimate would take into account the types of steel affected, stimulation of US production, and the reduction in quantity demanded. A more precise estimate could cut this estimate in half or perhaps more, but is still likely to be many multiples of a steel worker's salary. The tariff will move assets from a high valued use to a lower valued use.

*Among the job losses caused by this tariff, it is claimed that there would be 45,000 lost auto jobs and 30,000 lost construction jobs. The costs of these losses should be added to the half million.


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