7 Mar 2018

Policy brief: Proposed US tariffs on steel will cost five jobs for every one gained

If the United States goes ahead with applying tariffs on steel and aluminium imports a ripple effect will be felt throughout the economy, according to a policy paper by Joseph Francois, Managing Director of the World Trade Institute, and Laura M. Baughman, President of the Trade Partnership.

The Trade Partnership policy brief, “Does Import Protection Save Jobs?”, looked at the estimated net impacts of the tariffs of 25 percent on steel imports and 10 percent on aluminium imports announced by President Trump on 1 March.

It found that while employment will increase in the United States steel and aluminium sectors, it will decrease in every other sector of the economy, with the net result being five jobs lost for every one gained.

The paper did not take into account any potential retaliation against United States exports, focusing purely on the tariffs – designed to boost US production of steel and aluminium by making imports more expensive.

“We find that the tariffs would indeed have positive impacts on US steel and aluminium producers, but negative impacts on producers who use steel and aluminium, both imported and domestically produced. Those impacts, both positive and negative, would ripple through the economy,” said the authors.

The main findings were:

  • The tariffs would increase employment in the iron and steel and non-ferrous metals industries but cost jobs throughout the rest of the economy, producing a net loss of nearly 146,000 jobs;
  • More than five jobs would be lost for every one gained;
  • Workers in the fabricated metals, motor vehicles and parts, and other transportation equipment sectors would be particularly hard hit by the job losses;
  • Two-thirds of the lost jobs would affect workers in production and low-skilled positions.

The analysis is based on the Global Trade Analysis Project (GTAP) database that covers international trade and economy-wide inter-industry relationships and national income accounts, as well as tariffs, non-tariff barriers and other taxes.