Self-harm alert: Trump’s ‘man of steel’ ambitions will make America grate again

Other autocratic leaders have had the same idea. Georgian revolutionary Iosif Vissarionovich Dzhugashvili chose the Russian word for steel when he came up with the name by which he is best-known: Stalin. When Fascist Italy struck a military alliance with Nazi Germany three months before the start of World War II, Mussolini dubbed it the “pact of steel.”

Make no mistake, however: Trying to protect the US steel and aluminium industries for nation-building is a doomed project that will make America weaker.

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Tariffs of 25% on imported metal that Trump promised to unveil will be as ineffective in fostering domestic production as his 2018 round of restrictions. Since those actions, US production capacity for aluminium has fallen by 32%, while steel is down 3.6%. Why expect a different result?

If the latest round of levies is actually introduced—it’s anyone’s guess, given the frantic policy to-and-fro—they’ll serve only to damage producers and consumers in both the US and its allies. The knock-on outcome will diminish those countries’ ability to make their own metal.

Russia and China must be rubbing their hands with glee. Unlike, say, mobile phones, computers, machinery and consumer goods, the US doesn’t get much of this stuff from geopolitical rivals. Instead, it’s mostly from allies and countries that the US needs to keep on side, most of all at a time when it can’t afford to stand alone against the rising tide of authoritarianism. 

Canada and Mexico, the EU, Brazil, South Korea, Japan and Taiwan combined account for 80% of US steel imports. Add Bahrain, Qatar and the UAE—home to three of the biggest overseas US military bases—and you’re looking at about 70% of imported aluminium, too.

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The two metals are also some of America’s most extensively protected sectors: On top of the 2018 Trump administration tariffs, they are the subject of just under half of the 736 anti-dumping and countervailing duty orders and agreements currently in force.

This trade isn’t, as Trump appears to believe, some global zero-sum game, but a crucial aspect of maintaining profitable industries across a range of allies. The US and Canadian aluminium sectors, in particular, operate as a more or less integrated single industry: Canada uses its cheap and clean hydro power to smelt new metal and become the world’s biggest exporter of freshly-smelted ingots, while the US employs its vast consumer market to be the biggest exporter of scrap for recycled aluminium, which supplies about a third of global demand. 

Producers in each country are able to use trade as a safety valve to maintain their own profits without wasting capital on rolling mills and smelters where allies already have spare capacity.

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If there was any remaining doubt about the incoherence of this policy, consider that Trump’s tariff comments came just hours after a joint announcement with Japan’s Prime Minister Shigeru Ishiba that Nippon Steel will be investing in United States Steel Corp. That proposal salvages some remnants of a deal from a mooted takeover that was blocked by both the Biden and Trump administrations.

About a quarter of US Steel’s revenue is earned in Europe, however, also the biggest source of American steel imports after Canada. If Trump’s tariffs are imposed and Brussels inevitably reacts with its own restrictions, why on earth would Nippon Steel go ahead in spending money on a company whose largest export market has been pitched into yet another trade war?

The message of how that long-gone ‘pact of steel’ sped up the 20th century’s descent into madness isn’t purely a rhetorical one. Success in defeating the Axis powers depended fundamentally on the Allies’ openness to trade. The US sent $180 billion (in 2016 dollars) in goods and services to the Soviet Union during the course of the war. 

Italy and Germany, on the other hand, barely traded with each other, apparently convinced that self-sufficiency was the most sure-fire path to victory. There’s an economic history lesson there for all the Roman-saluting hangers-on milling around Washington these days.

For all the Axis powers’ bluster, it was middle-of-the-road, pro-trade liberalism that ended up winning. Europe’s fascists, deservingly, lost. ©Bloomberg

The author is a Bloomberg Opinion columnist covering climate change and energy.