Tariffs Will Kill 45,000 Auto Jobs
The Council on Foreign Relations says Trump Steel Tariffs Could Kill 45,000 Auto Jobs, Equal to One-Third of Steel Workforce.
We’ve analyzed historical data to estimate the impact of Trump’s proposed 25 percent steel tariffs on auto sales and employment. For the technically minded, you can follow the details of our calculations in the endnotes.
We estimate that an average car requires 2.4 tons of steel to build. Given that tariffs tend to increase import prices (which determine domestic prices) by at least as much as the tariff, we calculate that a 25 percent steel tariff will increase the price of new passenger vehicles manufactured in the United States by an average of 1.3 percent.
Now, based on recent research into the sensitivity of auto sales to price, we estimate that a 1.3 percent rise in the price of American-made cars would translate into a 4 percent decline in global sales of such cars.
The historical relationship between U.S. auto sales and employment is tight, as shown below.
Based on this relationship, we would expect a 4 percent decline in sales to result in auto-industry job losses of 45,000 by the end of 2019.
The total expected job loss from Trump’s steel tariffs in the U.S. auto industry alone is equivalent to almost one-third of the entire U.S. steel industry workforce.
In short, Navarro is wrong—deeply so. Employment in the U.S. auto industry will suffer from Trump’s tariffs to a vastly greater degree than it could possibly benefit in the U.S. steel industry.
Given huge auto-losses are likely coming anyway, it will be hard to evaluate the CFR's claim.
How much decline was baked into the cake anyway? Sales are already slowing.
Nonetheless, the idea is valid, as is Brookings'. These tariffs are pure folly.
US Steel Mill Workers (4 State Total)
People are so enamored with the absurd notion of "fair trade" they are willing to risk 6.5 million jobs in steel-using manufacturing to protect 140,000 steel workers (if that). I suspect the above chart is a better presentation of reality.
Job Losses by State
The new tariff policy "would increase employment in the US metals industry by 33,464 jobs while at the same time decreasing employment in other industries by about 179,334 jobs, resulting in a net loss of 146,000 jobs." pic.twitter.com/K3pbm2akfv— Prof. Steve Hanke (@steve_hanke) March 8, 2018
Kindergarten Arithmetic 101
Once again, I present Kindergarten Arithmetic 101: Analysis of the Trade Debate.
If Trump extends his wall to cover the entire border, instead of just the one shared with Mexico, and then bans or punitively tariffs every single good that uses steel as an input, recursively, as well; he just may succeed in driving up the domestic price of final goods to the point where both nominal labor compensation and nominal raw materials prices can be increased at the same time.
In doing so, he will ensure that not a single American made product of any kind, will be internationally competitive over time. This is exactly what the Latin American import-substituting “structuralists” did back in the 50s and 60s.
Mathematical Explanation of Deficits
For a mathematical explanation of trade deficits, please see Trump's Tariffs Show He's "Clueless About Trade".
The bigger the "win," the deeper the next recession.
Lost in the madness of this discussion is the irony that many of those who believe inflation is bad policy now beg for inflation in the name of "fair trade".
It's economic madness to protest getting something too cheaply!
Addendum: As originally posted, I mentioned a 266% tariff increase. That was under Obama . We are adding more tariffs now.
If a 266% tariff increase did not save steel jobs, what will?