Clark Packard and Alfredo Carrillo Obregon
On June 3, President Trump signed an executive order doubling his bogus Section 232 “national security” tariffs on steel from 25 percent to 50 percent (he also doubled the tariff rate on imports of aluminum), which took effect on the morning of June 4. Though hardly surprising, coming from this White House, the higher tariffs are another fit of economic illiteracy.
Predictably, steel prices rose on news that the president would double the tariff rate. As we explained earlier this year, the tariffs will almost certainly increase the domestic price of steel. Indeed, there is a long-running trend of US steel prices being consistently higher than the rest of the world. According to the Council on Foreign Relations’ (CFR) Benn Steil and Elisabeth Harding, American steel users pay about 75 percent more for steel than their global competitors.
This dynamic may benefit domestic steel producers—a tiny fraction of the US economy—but it wreaks havoc on the far greater portion of the economy that relies on steel inputs. Estimates vary, but we have calculated that steel-consuming manufacturing industries employ at least 46 times more workers than those employed in domestic steel production. Add in non-manufacturing steel-consuming industries like construction, and the ratio becomes substantially larger (indeed, some place it at 80:1).
Moreover, the higher tariffs also apply to steel derivatives—downstream products made from steel—further raising prices on American businesses and consumers.
In 2020, the Trump administration extended the original Section 232 tariffs to also cover steel derivatives not melted and poured in the United States, including steel nails and tacks and steel bumper stampings for motor vehicles and tractors. In February, the administration extended the tariffs still further to cover additional derivative articles, most even more detached from US national security, such as household furniture and commercial greenhouses. Based on the value of US imports from all countries in 2024, steel derivatives in fact account for most of the US trade affected by the Section 232 tariffs (Figure 2).
This list could get longer—and even less grounded in the tariffs’ national security premise—in the coming weeks.
For example, Sen. Bernie Moreno (R‑OH) recently sent a letter asking the administration to expand the Section 232 tariffs’ scope to cover more steel derivative products, such as household appliances like washers, dryers, and refrigerators. Sen. Moreno’s letter, though, said the quiet part out loud, citing the economic benefits of “national security” protectionism for Ohio-based appliance maker Whirlpool and the supposed “positive ripple effect” it would have throughout the broader American economy.
Yet it’s not clear that domestic steelworkers will benefit from additional tariffs.
The CFR’s Steil and Harding, for example, point out that steel labor productivity has declined substantially since President Trump’s first round of steel tariffs in 2018. They find that output per hour in the domestic steel industry has fallen 32 percent since 2017, the last year before the major steel tariffs, while output per hour economy-wide has increased by 15 percent.
As Clark Packard explains in a forthcoming Cato Institute paper, for nearly 60 years, policymakers have bent over backwards for the domestic steel industry, showering it with an unsavory mixture of tariffs, quotas, procurement preferences, etc. Unsurprisingly, such largesse has not stopped the domestic steel industry—and steel labor productivity—from continuing to lag.
But the corrosion of Trump’s latest moves goes beyond mere economics. They’re also a transparent abuse of the law, which has become a catch-all provision for rank protectionism, as also shown by other tariffs currently in force and both ongoing and potential future investigations under Section 232.
Casual observers may assume that much of the tariff damage has been mitigated as a result of the Court of International Trade’s ruling that the president’s “Liberation Day” tariffs exceeded the scope of his authority under a different statute, the International Emergency Economic Powers Act, or that this ruling could pave the way for future court-imposed restrictions on the president’s tariff authority. Yet, as Packard explained in a paper with our Cato colleague Scott Lincicome last fall, the president enjoys wide powers to impose “national security” tariffs on various sectors of the economy under Section 232, which courts have been reluctant to check. A more aggressive utilization of Section 232 seems likely.
As that paper concludes, the most surefire way of avoiding continued presidential abuse of Section 232 is through legislation that reins in the vast amounts of discretion that the executive branch possesses regarding tariff powers that were previously delegated by Congress. It’s long overdue for Congress to reassert its authority to “lay and collect Taxes, Duties, Imposts and Excises,” and to regulate commerce with foreign countries.