Tin Can Inflation
Our representatives repeatedly and loudly proclaim that tariffs are protecting jobs, that they are harming overseas manufactures, but that doesn’t make it true.
The only way tariffs work is by charging Americans more money.
Take tin cans, for example.
The Commerce Department is considering raising tariffs on imported steel, which is used to produce tin plate, which in turn is used to make the food cans on our supermarket shelves. Pushed, unsurprisingly by both the United Steel Workers union, and steel company executives, these tariffs could increase the cost of such imported material by 300%.
The reasons given for the tariff are the usual ones – the cost of foreign goods are unfairly low, and we need to save American jobs. The latest complaint is from the largest flat-rolled steel producer in North America, Cleveland-Cliffs who (shockingly) ‘applauds’ the vote to raise tariffs.
But do tariffs really save jobs and help the economy? Mother Jones (of all sources!) did an analysis of the last time we imposed steel tariffs:
As shown in this chart, their analysis revealed a net job loss of 2X more than the number of jobs the industry and government had estimated would be saved. What was the cost to save just one job in US manufacturing? From $42,000 to over $750,000 for each job saved. When President Bush imposed steel tariffs the cost to Americans was $400,000 per job. This begs the question, Why not just hand each of these workers $100k and save us all a lot of money?
How bad is the situation at Cleveland-Cliffs that they blame on cheaper Canadian, European and Chinese steel? The company laid off 300 workers in June. This is a hardship for those 300 workers and their families, for sure. How much worse will the impact on millions of American be if tariffs increase the cost of canned foods in our grocery stores?
Food manufacturers like Campbell Soup and Del Monte Foods warn that increased costs to produce cans could raise consumer prices by up to 30% (that’s 36 to 58 cents per can). One recent report claims that for every job saved by tinplate tariffs, 600 American jobs would be threatened.
According to a recent metal packaging industry article, “tariffs would threaten nearly 40,000 union and non-union manufacturing jobs and increase the cost of canned foods and products by up to 30%.”
Both the number of jobs to be saved by a new tariff, and the increased cost to the US consumer are probably exaggerated by the marketing people on both sides of this argument. Maybe fewer jobs will be secured, and the costs to consumers will only be lower. But even half the estimated food cost increase (15%) would be a real hardship for many American families.
The most ridiculous part of this entire conversation is that almost no US manufacturers produce the tin plate needed to make food cans. Suppliers like United States Steel closed down their can lines years ago. Food producers complain that they cannot buy the materials needed in the US. A spokesman for the Can Manufacturers Institute explained, “What is intended as a tool to protect US manufacturers will have the exact opposite impact because can makers need access to certain steels not even made in the US.”
Bush and Trump loved their steel tariffs, and now Biden seems to have fallen in love as well. The Commerce Department and the US International Trade Commission (which is a US Agency) have advanced the tariff conversation to a point these soaring costs may in fact be coming to a store near you!
If these tariffs do not save many jobs, and instead raises prices for American families, what is being won here?
Votes. Votes are being won.
The current administration owes a great deal to the US Steelworkers Union (who has yet to see a tariff they did not like). There may only be 300 jobs to be saved, but there may be nearly 600,000 votes to gain. Raising food prices for all of us, a small price to pay for re-election.
Over the decades, Congress has willingly handed over their fiscal responsibility, and the power that comes with it, to the Executive branch. But the real growth in power has been in government agencies like the Commerce Department and other departments run by unelected bureaucrats.
Voters elected Congress to manage fiscal policy, not the Commerce Department, who has a mission to carry out the decisions made by our representatives. While a president may have an easier reelection with some union votes, those representatives will have a difficult time explaining to voters why a can of soup is no longer affordable.