WASHINGTON — President Donald Trump’s decision to impose steep tariffs on imported steel and aluminum may boost Ohio’s steel industry, but it has prompted fears the move will lead to higher costs for people buying cars, trucks and other consumer items made with steel.
Although White House officials insist the tariffs will not dramatically increase the price for domestically produced steel, past history has shown that when steel companies are shielded from foreign competition, they tend to raise their prices.
“This is a type of economics reasoning that only Peter Pan could endorse,” said Edward Hill, a professor of public administration at Ohio State University. “I am absolutely certain that Mother Teresa is not in charge of the pricing department at an American steel company.”
In addition, if the new tariffs spark a major trade war, Ohio manufacturing and agricultural exports could be hurt. A new state report shows that last year only eight other states exported more goods than Ohio, which exported nearly $51 billion worth of goods, including machinery, vehicles and parts, oil seed and grains.
A spokesman for Honda North America, which employs 15,000 people in production plants in central Ohio, warned “history has shown that tariffs imposed on imported steel could raise prices on both domestic and imported material, this causing an unnecessary financial burden on our customers.”
John Bozella, president and chief executive officer of Global Automakers, a trade group representing automotive manufacturers around the world, said “increased costs will make our industry less competitive and harm American workers, consumers and our economy,” he said, calling tariffs “a tax that will result in higher prices that consumers will ultimately bear.”
Trump announced the new tariffs — 25 percent on steel imports and 10 percent on aluminum imports — at a White House gathering that included workers from the two industries and Vice President Mike Pence, Treasury Secretary Steve Mnuchin and Commerce Secretary Wilbur Ross.
The administration exempted Canada and Mexico from the new tariffs, although administration officials suggested those exceptions would be tied to both countries agreeing to U.S. demands on a revised North American Free Trade Agreement.
“These actions we are taking today are not a matter of choice, they are a matter of necessity for our security,” Trump said, adding “a strong steel and aluminum industry is vital to our country.”
Trump indicated that the tariffs could be removed on a case-by-case basis. But while he criticized China for flooding the world market with inexpensive steel, his decision would largely damage steel producers such as Japan, Germany, Brazil and South Korea.
Sen. Sherrod Brown, D-Ohio, who has urged the Trump administration to penalize countries such as China, said he was glad Trump imposed the tariffs. "I would have done it differently. I would have targeted China. I’m glad he is flexible, but once he makes these decisions he needs to stick to them.”
Brown tartly dismissed fears that tariffs would lead to job losses, saying “this is not the first time we have heard the sky is falling from free traders. The fact is people crying 'The sky is falling' are the same people who pushed through (trade deals) which led to unemployment in Dayton, Mansfield and Cleveland.”
Brown is among those with the most at stake politically. If the tariffs provoke a trade war and higher prices, it could damage his re-election campaign this fall.
“Sherrod has made a career about running against trade,” said James Ruvolo, former chairman of the Ohio Democratic Party. “It hasn’t hurt him yet. I think this plays right into his wheelhouse.”
But Trump’s decision led to a split among Republicans who tend to favor free trade. Ohio Gov. John Kasich complained that “these actions will invite friction and retaliation from our allies as well as a loss of American jobs and higher prices for American consumers.”
Rep. Steve Stivers, R-Upper Arlington, said while he favors “anti-dumping policies,” he is “concerned about the potential unintended consequences of these tariffs.”
Sen. Rob Portman, R-Ohio, said although "action is needed to address the worldwide overcapacity of steel," he is "concerned that broad-based tariffs will have unintended consequences for downstream steel and aluminum users and will unnecessarily invite retaliation in the form of tariffs against U.S. exports."
In large part because NAFTA integrated the North American automotive market, nearly half of Ohio’s exports last year went to Mexico and Canada.
Ohio farmers exported $1.8 billion worth of soybeans last year, with nearly $700 million to China and $351 million to Mexico.
Joe Cornely, a spokesman for the Ohio Farm Bureau, warned that “trade is crucial to Ohio farmers and the state's entire economy. We're telling the administration and Congress that while we understand the need to protect American industries and jobs, the consequences of trade actions on farmers must be part of the decision-making process."
The Ohio Steel Council said the state’s steel industry has a total economic impact of $7.2 billion. The council says nearly 100,000 jobs can be linked to the steel industry through direct and indirect jobs, and the jobs generate $4.8 billion in wages. Direct jobs alone totaled around 22,000, according to the council.
By contrast, Ohio’s automotive industry is estimated to employ 629,178 as of January 2015, including direct and indirect jobs, according to the Center for Automotive Research. Auto jobs in the state account for 11 percent of the state’s workforce, according to the center.
John Willoughby, executive director of the Ohio Steel Council, declined to comment specifically on the tariffs but said the council supports “full enforcement of all our trade laws in order to create and protect a level playing field with our global trading partners to ensure our industry will be able to remain competitive in the future.”