It’s been over a year since the president imposed his widely criticized Steel and aluminum Tariffs on worldwide imports of the metals to the United States. Since then he’s imposed many more tariffs: solar tariffs, washing tariffs, and of course, a massive list of tariffs of Chinese goods in general.

While many American despise Trump and many others support him, I’m not going to lean towards any part of the political spectrum (at least I’ll try not to), and instead, will try to bring a factual evidence-based response to the question of whether or not Trump’s tariffs are working(and whether or not Trump’s Tariffs are worth imposing).

Before we delve into the matter at hand however; we need to know what a tariff is. So here’s a very brief summary:

What’s a tariff?

Simply put, a tariff is an additional tax imposed on an import (coming in) or export (going out), their main functions are to generate revenue and to protect domestic industries. Tariffs can be both fixed (i.e. a 50 cent tariff) or a percentage (i.e. a 50% tariff). These are referred to as specific or ad valorem respectively.

For instance, if the United States imported $10,000 worth of phones from Korea and a 10% ad valorem tariff is imposed on all Korean phone imports, an additional $1,000 dollar tariff must be paid.

If the tariff was specific it would most likely apply at a per unit basis. Say the United States imported 10,000 actual phones from Korea and a $1 tariff was imposed as a specific tariff per unit. Then $10,000 dollars in tariffs must be paid.

On who pays the tariff, and when and where does it get paid, that’s a topic for another post, for now we’ll stick to what we learnt from our summary.

The Steel and Aluminum Tariffs

One of the earliest and most talked about tariffs were Trump’s Steel (25%) and Aluminum (10%) import tariffs. Or simply put, all steel and aluminum coming into the United States from another country would have to pay an additional 25% and 10% tariff respectively.

So what’s the point of that? Well if we look back at our summary and brief definition: The main functions of tariffs are to generate revenue and to protect domestic industries. In Trump’s case he heavily emphasized the “protect domestic industries” part.

It’s been over a year, data on the steel and aluminium job industries has been updated the tariffs were imposed, so is it working? Is the tariff truly protecting the domestic industries?

Ehh, kinda, yes and no?

The Impacts of the Steel and Aluminum tariffs

The answer is mixed but actually not too difficult to understand. On the surface, higher tariffs mean that other countries are less likely to export their steel and aluminium to the United States, this in turn means that the American Steel Industry will now be the main supplier of steel in country, which ideally leads to an increase in sales, growth, jobs – all the good stuff.

On paper and without going further that makes sense, but here’s the issue:

Before the tariffs were imposed, industries in the United States that were using steel and aluminium to produce their goods were importing it from China or wherever else they could get a good deal, they weren’t really using more expensive American steel(and yes, it was more expensive otherwise they would have never imported foreign steel in the first place). Overall this was beneficial to these companies since they could keep their costs low and maximise their revenues (and therefore grow more and generate more jobs). But tariffs changed that.

Now, it’s not as lucrative to import foreign steel because of that 25% tariff, it became more expensive than US Steel. Now these industries are forced to buy steel domestically. And although it’s cheaper than importing heavily tariffed foreign steel, it’s still more expensive than it was prior to the tariffs. And that’s where things start to look ugly.

The amount of industries that use steel for manufacturing far outnumbers the amount that produce it, so when the costs of those industries rises since now they’re forced to buy American steel, they generate less revenue, they experience less growth or even negative growth, especially if they were barely breaking even in the first place. Additionally, negative growth and declining revenues leads to closures of plants, factories and a lower demand for workers (increasing unemployment).

It gets worse

So maybe you’re thinking that there’s a chance the growth of the steel industry will offset the decline of industries that use steel.

And it does, until…

Until the closure of businesses that use steel leads to less of a demand for the production of steel leading to less revenues for the steel industry and ultimately, negative growth.  Everyone loses.

You don’t really need the data

In economics tariffs are regarded as bad. And although I said earlier that it’s been over a year of steel and aluminum tariffs and that the data has been updated, you don’t need it.

The way tariffs work, no matter how you look at them, economically they will always hurt. In fact, tariffs are one of the few things that economists agree are universally bad.

So to change my previous answer, are the tariffs protecting domestic industry? Yes, however that protection is greatly offset by the damage that the tariffs cause.

So again, are tariffs worth it? Economically, hell no.

In Defense of Tariffs

Although I can’t support tariffs as a positive economic tool for the reasons I’ve laid out above, I do understand the use of them for political gain.

I don’t know what Trump is planning with his list of tariffs, but perhaps the political leverage they give him can be used to benefit the United States overall in the future.