Wilbur Ross has decided to go all Soviet over recent price rises in steel in the United States. So, he, Robert Lighthizer, The Donald and Peter Navarro decide to make steel more expensive inside the US. Then, when steel becomes more expensive in the US this is blamed upon speculators, not the idiot decision to have tariffs by Ross, Trump, Navarro and Lighthizer. The real horror of this being that the aim and purpose of the tariffs is to make steel more expensive, then when it becomes so they’re all standing around with a “What, Who, Me?” attitude.
The Trump administration blamed speculators for the extent of the rise in domestic steel prices since its introduction of tariffs, saying it would investigate what the commerce secretary Wilbur Ross called “profiteering”.
Mr Ross on Wednesday said that domestic steel prices, which have become a growing area of concern for many US manufacturers, had increased far more than was justified by the 25 per cent tariff that President Donald Trump ordered earlier this year.
US benchmark steel prices have risen almost 40 per cent this year, far more than increases seen in Europe or elsewhere in North America.
Well, that would be nice to see, wouldn’t it? That calculation of what would be the justified price rise as a result of the tariffs. For there are two important things we might be able to extract from such a presentation:
U.S. benchmark hot-rolled steel coil June futures prices HRCc1 were quoted at $902 (£684.8) per tonne on the New York Mercantile Exchange on Wednesday, up 53 percent from $589 a year ago.
“There’s no reason for tariffs to increase the price of steel by far more than the percentage of the tariff, and yet that’s what has been happening,” Ross said. “That clearly is not a result of the tariff, that’s clearly a result of antisocial behaviour by participants in the industry.”
Well, no, that’s not how economics works. If we slice some portion of supply out of the market – say by excessive taxation – then prices could go all sorts of places. There’s absolutely nothing at all which says that price rises should be proportional to the tariff itself. So, we know that Ross and others don’t understand the economics, but then we knew that anyway. They wouldn’t have imposed the tariffs if they did, would they?
But there’s this second point. That calculation of what would be a reasonable price rise as a result of the tariffs. We’d most surely love to see that, no? How this administration measures the damage done to all steel users as against the benefits to steel producers?
Why, we can even construct an idea of how they’re thinking here. A 25% rise would be reasonable Ross is saying. Hmm, there’re some 80 million tonnes used a year, $500 a tonne is a useful guesstimate at a blended price for the different types. So, 80 million x $125, or $10 billion a year is a reasonable price for all Americans to be paying to support the steel industry. Or $50,000 a year for each of the roughly 200,000 jobs in that US steel industry.
Hmm, we’re getting very close to insisting that we should shut the entire US industry down and jut go buy imports, aren’t we? Well, in economic logic we are, yes.
Instead of all of this we get a Soviet, in fact near Stalinist, insistence that it’s all the speculators’ fault. You never know, we might end up with the Feds following Elon Musk in blaming the wreckers, and could the Promparty be far behind?