“On the campaign trail, Trump pledged to put a tariff of between 10 percent and 20 percent on all imports to the United States, along with a 60 percent tariff on Chinese goods and a 25 percent import surcharge on Canadian and Mexican wares — at least, until our neighbors choke off the flow of all migrants and drugs across America’s northern and southern borders.
This protectionist agenda is far more radical than anything Trump attempted during his first term. It threatens to hamper American tech companies by increasing the cost of semiconductors, depress stock valuations by reducing economic growth and fueling a global trade war, and disrupt the US auto industry, whose supply chains were built around the presumption of duty-free trade with Mexico.
Thus, American investors, executives, and entrepreneurs watched Trump’s first day in office with bated breath: Would his inaugural address and initial executive orders prioritize corporate America’s financial interest in relatively free global exchange — or his own ideological fixation on trade deficits?
Trump’s Day 1 actions did not fully clarify his priorities on this front. In his inaugural speech, the president reiterated his broad commitment to protectionism. Meanwhile, his administration prepared to launch federal investigations into America’s trade deficit in general, as well as the trade practices of China, Mexico, and Canada in particular.
Nevertheless, Trump did not actually establish any new tariffs on his first day in office, as his administration’s arch-protectionists had hoped that he would.
Investors interpreted Trump’s caution as a sign that he would be heeding his advisers’ push for a more limited and incremental tariff policy; stocks rose Monday while the US dollar fell (stiff tariffs would increase the value of America’s currency).
Wall Street’s relief may be premature. Trump appears as ideologically perturbed by America’s trade deficit as ever.”
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“Imposing even a 10 percent tariff on all imported goods would not only harm various business interests, but would also likely increase costs for consumers. Thus, such a duty would harm both Trump’s donors and voters.
If Trump’s first term is any guide, his universal tariff would not even redound to the benefit of American manufacturers, who would be vulnerable to higher costs and retaliatory tariffs from foreign nations. Generally speaking, presidents seek to avoid enacting policies that harm the bulk of their coalition, to the benefit of a narrow band of ideologues. And this is what implementing Trump’s grandest visions for trade policy would likely entail.
Second, the imposition of a universal tariff would roil stock markets. During Trump’s first term in office, he monitored the markets’ performance obsessively, tweeting about it incessantly and suggesting that stock values were a barometer of sound policy, warning in 2018, “If Democrats take over Congress, the stock market will plummet.”
Finally, Trump has recently shown some sensitivity to the interests of his newfound friends in tech, even when those interests conflict with the tenets of rightwing nationalism. Over the holidays, Elon Musk feuded with their co-partisans over the desirability of high-skill immigration and the H-1B visa, which help American tech companies to hire foreign talent. Trump ultimately expressed support for Musk’s position.”
“in the face of increasingly tough competition both domestic and foreign, US Steel started to look for a buyer. Late last year it found one in Nippon Steel, the largest steel manufacturer in Japan, which offered $14.9 billion for the company.
In many ways, it seemed like a natural fit. The world’s current leading steel producer, by a wide margin, is China, and just as a US-Japan alliance is the linchpin of efforts to contain China militarily, a US-Japan corporate merger could be a linchpin of efforts to contain China’s efforts to dominate the steel market. Letting a military rival control the production of such a crucial material (and such an important one for defense applications like warships and warplanes) comes with clear risks.
Except the deal now will not go through. President Joe Biden, who came out in opposition to the deal in March, announced on Friday he would block the sale on the grounds that the deal represented a threat to national security.
“It is my solemn responsibility as president to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad,” Biden said in a statement. “And it is a fulfillment of that responsibility to block foreign ownership of this vital American company.”
The decision comes after the Committee on Foreign Investment in the United States (CFIUS, an interagency council controlled by Biden’s Cabinet and other appointees) decided not to formally recommend whether the takeover should go forward, though it did express reservations about the deal in letters to Nippon Steel and US Steel. CFIUS has the power to vote mergers and acquisitions it deems dangerous to national security.
National security, though, is not necessarily the reason why Biden made the highly unusual decision to block the deal, even though US Steel is threatening to shut down multiple mills should the deal not go through, which could put thousands out of work. His administration’s diplomats had reportedly told Japanese officials they need to kill the merger so Democrats would win Pennsylvania last November. (Even though Kamala Harris also came out against the deal on the campaign trail, she still lost Pennsylvania by over 100,000 votes.) Donald Trump also signaled opposition to the acquisition.
Why did this deal become so unpopular? Some of it surely is the symbolism of “US Steel” being sold to “Nippon Steel,” which if included as a plot point in a late ’80s/early ’90s movie about the unstoppable economic rise of Japan, would come across as a little too on the nose. Unsurprisingly, Trump, whose form of nationalism has a distinct 1980s vintage, explained his opposition as motivated by a desire not to sell out to “Japan.”
But the bigger reason politicians lined up against the deal is that the leadership of the United Steelworkers union (USW), which includes most of US Steel’s workforce among its 60,000 steelmaking members, strongly opposed it, though many members dissented. Sen. John Fetterman (D-PA) candidly stated he’ll oppose the deal as long as the union does.”
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“One can hardly blame the United Steelworkers union for being skeptical of minimills, given how the spread of the business model has decimated its membership. The problem is not just that minimills require fewer workers, but that they tend to be located in southern, anti-union states, with non-union labor.
There are a total of eight operational integrated steel mills in the US, all owned by US Steel or Cleveland-Cliffs; three are in Indiana, two in Ohio, one in Michigan, and one in Pennsylvania. The eighth, in Granite City, Illinois, idled its blast furnaces indefinitely late last year, though it continues to roll and finish steel slabs produced elsewhere. All eight of these facilities are unionized, six by the United Steelworkers.
By comparison, there are 88 electric arc furnace facilities in the US. While it’s hard to know what share are unionized, most are not; only about 23 percent of iron and steelworkers in the US overall are covered by a union contract, down from over half in 1983. Given that almost all workers in integrated mills are covered, it’s reasonable to surmise that the large majority of minimill workers aren’t in a union, making steel a majority non-union industry overall.
There are always exceptions, like a US Steel electric arc furnace facility in Alabama where workers are USW members, but for the most part, big integrated mills mean union power, and minimills with electric arc furnaces mean union decline. Nucor, the largest steel company in the US with over 25 million tons sold last year to US Steel’s 15.5 million, both pioneered minimills and is famously non-union. Even US Steel, long a center of union strength, acquired an Arkansas non-union electric arc furnace mill in 2021.”
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“How did this tie into the Nippon Steel bid? Essentially, the steelworkers saw Nippon as threatening to move US Steel toward minimill-type production and away from the conventional blast furnace/basic oxygen furnace integrated mills where the union is strongest.”
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““The reality is that there are certain crucial products that simply cannot be made without blast furnaces, including those used in automotive, energy, and national security applications,” the union insisted. They have a point. We can’t run the world economy on recycled scrap metal alone, and advanced high-strength steel (AHSS), needed for car manufacturing among other uses, tends to be made with blast furnaces, not electric arc furnaces, in part because scrap of high enough quality to make AHSS is rare. EAFs running on iron produced through direct reduction, not blast furnaces, may be able to make inroads here, but right now we need blast furnaces for cars.
There are other union concerns as well. The acquisition was announced without giving the union prior notice, which it claims violates the collective bargaining agreement reached between the union and US Steel.
Moreover, the union had another buyer in mind: Cleveland Cliffs, the No. 2 steel company in the US and the only other operator of traditional integrated mills. The company committed to the union that no union member would lose their job upon acquisition, and would continue to operate blast furnaces. Once again, the USW position emphasizes keeping traditional mills, with large union workforces, going.
However, Cleveland Cliffs only offered $7.3 billion, about half of Nippon’s $14.9 billion, for US Steel. It reportedly offered much more than that privately in response to the Nippon bid, but even then it didn’t match the Nippon offer. A Cleveland Cliffs purchase would have also raised major antitrust issues that would presumably bother the unusually antitrust-focused Biden administration. The Alliance for Automotive Innovation, the US auto manufacturers’ lobby, wrote to policymakers to express concern over one firm controlling 100 percent of US blast furnaces, and 65 to 90 percent of the steel used in vehicle manufacturing.
Industry press coverage of Cliffs notes quite candidly their strategy of trying to dominate blast furnace production so they can charge a higher price. In other contexts, that’s a kind of monopoly-oriented strategy that Biden appointees like Federal Trade Commission chair Lina Khan or Department of Justice antitrust chief Jonathan Kanter would normally object to.”
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“Some environmental groups criticized the deal on the grounds that Nippon is committed to keeping high-emissions blast furnaces running — precisely the opposite conclusion of the steelworkers’ union. If the steelworkers were right, that probably would have been good news for Nippon and US Steel’s carbon footprint.
As it stands, electric arc furnaces are far cleaner than blast furnace/basic oxygen steel production.”
“The Committee on Foreign Investment in the United States (CFIUS) was unable to reach a consensus on Japan’s Nippon Steel’s $15 billion acquisition of U.S. Steel. The very committee that is responsible for safeguarding the U.S. from compromising foreign investments doesn’t recommend blocking the merger”
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“CFIUS’s inability to recommend blocking the merger on national security grounds is not surprising: Japan is not an enemy of the U.S., but a close ally. The U.S. has been formally allied with Japan since the signing of the U.S.-Japan Security Treaty in 1951. In April, Biden and former Japanese Prime Minister Fumio Kishida issued a joint statement celebrating “a new era” of bilateral security cooperation and announcing “several new strategic initiatives to strengthen our defense and security cooperation [and] bolster economic security.”
A section of the joint statement details the two countries’ commitment to economic cooperation under the U.S.-Japan Competitiveness and Resilience (CoRe) Partnership, which the Biden administration announced in April 2021 to advance cooperation “on sensitive supply chains…and on the promotion and protection of critical technologies.” The statement also celebrates mutual investment, pointing to Microsoft’s $2.9 billion investment in AI and cloud infrastructure in Japan and Toyota’s $8 billion battery production investment in North Carolina—a mere 1 percent of Japan’s $800 billion in foreign direct investment in the U.S.
If mutual investment in critical industries like semiconductors and batteries doesn’t compromise national security, the burden of proof is on those opposing Japanese investment in American steel production to explain why it does. CFIUS could not meet this burden and refrained from issuing a recommendation accordingly.”
“America needs minerals like copper and silver to make things. Even President Joe Biden made a speech saying America will need 400-600 percent more such minerals to make “solar panels, wind turbines, and so much more!”
An iPhone alone requires aluminum, iron, lithium, gold, copper.
But when investors dare try to dig up such minerals in America, the NRDC objects and uses political connections to stop them.
Twenty years ago, entrepreneurs tried to open a mine in Alaska. Before they even got the application in, the Environment Protection Agency (EPA) vetoed it.
Why? Because groups like the NRDC say the mine “would be a catastrophic threat to the wildlife and…fragile ecosystem.”
They get their way because when Democrats run the EPA, they not only support NRDC’s positions, they even hire NRDC employees.
The next Republican administration removed the EPA’s veto. The Army Corps of Engineers then studied the mine and concluded that it wasn’t an environmental threat.
So, is Pebble a bustling mine today? No.
Democrats got elected and vetoed it again.
Physicist Mark Mills wonders why anyone would try to open a mine in America today. “Why in the world would you put millions, maybe billions of dollars at risk, spending those decades to get a permit, knowing there’s a very good chance they’ll just cancel a permit? How in the world do you build mines in America knowing that that’s the landscape you have?”
Well, you don’t.
America now ranks second to last in the time it takes to develop a new mine—roughly 29 years. Only Zambia is worse.
“You start applying for permits,” says Mills, “You’re going to be waiting not months, not years, but decades!”
Waiting while the NRDC sues and runs frightening anti-mine ads, saying nature will be “destroyed by a 2,000-foot gaping hole in the ground!”
Mills points out their deceit. Today’s mines disturb “a tiny infinitesimal pinprick in the landscape” and we do need to disturb the landscape a little, because “we need metals and materials and minerals to build everything that exists to make society possible!”
I confronted NRDC spokesman Bob Deans, saying the NRDC killing mines also kills people’s opportunity. He responded that “clean” energy creates jobs.
“We created 50,000 new jobs in this country, putting up wind turbines, solar panels, building the next generation of energy efficient cars. This is where the future is!”
“But also, you need copper and gold,” I point out.
“That’s right,” says Deans, “And we have to weigh those risks.”
But the NRDC doesn’t weigh the risks. They just oppose American mines.”
“The US shipbuilding industry is a shadow of what it was in the final years of the Cold War. The Navy is reliant on only a handful of major shipbuilders that design and construct different ship classes: Huntington Ingalls Industries (aircraft carriers, submarines, amphibious ships, destroyers), General Dynamics (submarines, destroyers, support ships), and Fincantieri Marinette Marine Corporation (frigates). Higher production rates would require infrastructure costs and a larger workforce. Repair and maintenance are likewise constrained by the few public yards available.
A Department of the Navy review earlier this year found that top US Navy shipbuilding projects, from new submarines to surface ships, are delayed by years and facing ballooning costs.
The longest project delays, expected to be at least three years, are for the coming Block IV Virginia-class attack submarines and the Constellation-class guided-missile frigate. The Navy’s first Columbia-class ballistic missile submarine, a priority for the Pentagon, isn’t expected to arrive until 12 to 16 months after its planned delivery, potentially leaving a hole in readiness plans for the nation’s nuclear forces. And the Navy’s next Ford-class carrier, USS Enterprise, faces a delay of 18 to 26 months.”
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“the US needs to make significant investments in rejuvenating its military shipbuilding capabilities and capacity, ramp up production, and streamline its design process. A clearer strategy for industry and establishing stable supply chains, as well as hiring and keeping talented workers, is critical, too. Larger investments and drastic changes may be needed to build and maintain a force beyond 300 ships.”
“The nationalist conservative obsession with blue-collar manufacturing jobs often ignores the interests of workers and the will of consumers. Sen. J.D. Vance (R–Ohio) provided a perfect illustration in an early August campaign speech in Nevada on “the American dream.”
In it, Donald Trump’s protectionist running mate declared that “a million cheap, knockoff toasters aren’t worth the price of a single American manufacturing job.”
On its face, that’s just rhetorical silliness. Common sense says anyone should be willing to make that trade: Affordable and abundant appliances are part of the reason that 21st century America is the best place to live in the history of the human race. Jobs are abundant too—there were 7.6 million unfilled jobs in August, per the Department of Labor—and the loss of a few should not worry vice presidential candidates.
But when right-wing populists such as Vance make this argument, they mean something less literal: that America would be better off if the nation manufactured more and imported less, and Americans would be better off working in metaphorical toaster factories than doing whatever job they have now.
Both ideas are wrong.
The supposed decline of American manufacturing is wildly overstated by politicians such as Trump and Vance (and across the aisle by President Joe Biden). Yes, a lot of low-level manufacturing has been outsourced via global trade, but American manufacturing output is running at near-record highs these days. Instead of making toasters, America makes BMWs and designs the components in, and apps on, your iPhone.
That’s a good tradeoff, especially for workers. You earn more building fancy cars than you do piecing together basic kitchen appliances. The average wage for manufacturing workers (excluding managers) has doubled since 1999, outpacing inflation.
Vance and his nationalist conservative allies think that’s a problem, one they wish to solve with more tariffs and other trade barriers that they hope will incentivize low-paying toaster-making jobs to return to the United States.”
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“When Biden expanded Trump’s tariffs on imported steel and aluminum earlier this year, one of the many objections came from the North American Association of Food Equipment Manufacturers (NAFEM). In a June letter to the U.S. Trade Representative, the trade association pointed out that higher tariffs on the raw materials needed to manufacture appliances would, predictably, harm American companies.
“Even in instances of growing sales, the costs of tariffs grow with business,” NAFEM wrote. Member companies would thus be forced to “reallocate the funds that would be used for wage increases and additional employees to pay for the increased tariff costs.”
The nationalist conservatives also misunderstand Americans’ willingness to accept Vance’s deal—even if many prefer the idea of boosting domestic manufacturing.
Earlier this year, the Cato Institute polled consumers to ask if they’d support a tariff on imported blue jeans in order to increase blue jeans manufacturing jobs in America. About 62 percent of respondents said yes.
But hold on. When told that the tariff would make jeans just $10 more expensive at the store, support for that policy flipped: Now, 66 percent opposed it. And if the tariff would make jeans $25 more expensive, an overwhelming 88 percent said no.”
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“How many Americans living in the year 2024 aspire to work—or see their children and grandchildren work—in a toaster factory?
The answer is pretty close to none. That’s great. We should prefer a country where young men and women aspire to be scientists, AI developers, and tech entrepreneurs over one where the dream job is a 40-hour-per-week gig at the local toaster plant.
Vance, and his nationalist conservative allies, are selling a vision of America that’s long out of date. It’s a backward-looking economic message that assumes people would be happier if they were less materially wealthy and had fewer prospects. Most Americans seem unwilling to go along when you show them the bill.”
“European industry — and Germany first and foremost — was battered by the surge in energy prices following Russia’s invasion of Ukraine. The bloc rode out the immediate emergency better than expected, finding alternatives to Russian gas, for example, through imports of U.S. liquefied natural gas.
But the hope that European industry would swiftly recover has faded, even as the eurozone economy in the aggregate returns to growth.
Eurostat’s industrial production index for the eurozone remains below its 2021 level, and is trending lower. And policymakers are starting to realize that the turnaround they had expected is not materializing.”
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“The numbers underline the challenge of maintaining Europe’s competitiveness — and relevance — as China and the U.S. race to reshape the global economy within the context of an increasingly acute geopolitical rivalry.”