Econfact  reviews the case of US steel tariffs, after the Department of Commerce concluded that under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862(b)(1)(A)) steel and aluminum imports constitute a “national security threat.”

But wait there is more, on May 23rd 2018, the administration initiated a new investigation to determine whether imports of automobiles also threaten US national security.

Prior to the two Trump cases, the Department found national security threats in only two cases in the past 56 years (both involving oil). How could this be true? Well because the Department of Commerce recently adopted a new “definition” of “national security.” Commerce Secretary Wilbur Ross stated that

“National security is broadly defined to include the economy, ….to include employment, to include a very big variety of things… 

So national security = economy = a very big variety of things.

This raises an interesting question, what is the effect of a steel tariff on the economy. Since steel is an important intermediate input, the tariff implies higher prices not only for consumers but also producers (e.g., of cars). Here is a summary of the economic effects from Econfact:

• “Imposition of these tariffs under the guise of national defense could have large negative economic effects even in the absence of retaliation. For instance, one estimate indicates a 40,000-job loss in the automobile industry (a heavy steel user) from the steel tariffs alone. With the expiration of exemptions on the EU, Canada and Mexico, some $50 billion of steel and aluminum imports are now covered by tariffs. One can expect the employment impact to be even more substantial. Adding in retaliation (but incorporating the now defunct exemption for Canada and Mexico), the consulting firm Trade Partnership estimated a net loss to the economy of 470,000 jobs. The Peterson Institute for International Economics estimates a 25 percent tariff on imported automobiles (currently at 2.5 percent for non-Nafta members, and 25 percent for trucks) would reduce employment by 195,000 over the course of three years. With retaliation, that number would rise to 624,000.”

Under the above definition of national security, maybe we should subsidize steel?