Tariff History Repeats, Again

It has long been known among economists and economic historians that protectionism very often fails to reinvigorate the protected domestic industry at issue. I summarized this research in a 2019 column for National Review:

My 2017 survey of the academic literature on over a century of U.S. protectionism pre‐​Trump showed that, with very few exceptions, it imposed immense economic costs on American consumers, workers, and companies… while also failing to open foreign markets or resuscitate protected American firms and workers over the longer term. In case after case, the jobs still disappeared, and the companies either went bankrupt or came back to the government for more help.

As noted in that 2017 paper and a subsequent blog post on the same subject, no U.S. industry had received more import protection in the decades surveyed than the steel industry. Yet in the wake of those import measures (and billions of dollars in government subsidies) was not a thriving, competitive industry but simply more requests for import protection and government assistance. I therefore concluded at the time that, unless policymakers quickly relearned our long history of failed protectionism, “we may be doomed to repeat it.”

They did not learn.

After two‐​plus years of “national security” tariffs and quotas on a wide range of steel imports from almost all major sources, Big Steel is once again hurting (pain that began before COVID-19) and going back to the government for help:

Donald Trump claims his tariffs saved U.S. steel companies. But with production still slumping and jobs near an all‐​time low, the iconic U.S. industry is seeking a long‐​term solution.

That government “solution,” according to various steel industry representatives quoted in the article above, is somewhat unclear: federal infrastructure dollars (goosed by tightened “Buy American” rules) and “working with allies” are both mentioned. What they don’t mention, however, is what might actually work: eliminating the tariffs, which have been shown to hurt U.S. manufacturing and even several domestic steelmakers, and imposing long‐​term market discipline on Big Steel — a discipline it hasn’t faced in decades (if ever). Until then, it’ll very likely be more of the same.

Again.