Protectionists, how do impacts like this affect your thinking? Do you think we should just increase the tariffs on downstream products too? Or does it give you pause?
“Tariffs will inadvertently drive the price of American steel higher,” CEO Paul Czachor tells Philly.com’s Sam Wood. “Within a year, we might have to raise our prices so our kegs cost 30 percent more than an import. That puts the whole business in jeopardy.”
As Czachor tells Philly.com, “Downstream imported products, made outside of the U.S., that use a lot of steel, will still be priced cheaply.” While his business will face a 30 percent increase in costs, foreign keg manufacturers will be able to make and sell their products to American breweries for pretty much the same price as today.
Mr. Czachor’s costs include raw materials (steel), electricity, machine maintenance, labor, taxes, etc. If a full 25% increase in just the steel cost results in a 30% increase in the total cost of the product then he deserves to go belly up.
I think the Philly.com writer screwed things up. Mr. Czachor said that he will have to increase his price so that it is 30 percent higher than his foreign competitors. The writer misses that distinction, botches that second paragraph and calls it a 30-percent increase in costs.
That product price may have to increase to 30 percent more than foreign product? We don’t have enough information to math it out, but it’s certainly possible depending on the current relative pricing. I guess we could just assume the manufacturer is a liar or bad at math until such time as he provides through a media filter the math behind his figure and just move on.
I think better question is; why are you picking winners & losers?
Lowering the cost of steel is something the economy does naturally through comparitive advantage.
You have every indication that economies do just fine without protecting the production of a given good.
You simply do what Germany did; find goods higher up the value chain to produce. Also, re-export and re-manufacture, the bread & butter of any truly free economy.
By contrast, protecting one “steel” job, destroys about 60 others, and hurts our own exports.
This is centralized economic planning, and the error in it is clear. Not to mention it needlessly violates individual sovereignty. Not to mention it helps China.
You’re confused on the math and a reporter’s apparent error, and as a result, you seem to be missing the point. Tax foreign steel, the price of steel will increase. That’s literally what tariffs do. That means it costs more to produce. How this impacts real hard-working, salt-of-the-earth blue-collar workers ought to be of interest to you and the president. It adversely impacts them in the name of saving American jobs. That’s the point of this story.
Everyone here is forgetting that corporate DOMESTIC taxes have just been lowered by 15% overall. That means that domestic steel producers COULD lower their prices by as much as 14% and STILL come out ahead since THEY aren’t subject to that 25% tariff on IMPORTED steel.
True, I suppose, but all the tariff does is bring imported steel up to what it costs to actually PRODUCE and stops the advantages other countries enjoy because of “dumping.” Everyone on the planet knows that China subsidizes its steel industry and dumps steel on the world market at below costs because they don’t HAVE the domestic market for what they produce and their ultimate aim is to shut down their competition.
And everybody knows we win because of it .We get to enjoy cheap steel and focus on other more valuable production. But they’re not our big steel supplier.
In any case, we want other countries to have advantages. It gives us all something to trade with each other. It makes trade possible whether it’s at an international level or an individual level.
Eliminating comparative advantages – increasing the price of products – just costs us in the end. We don’t really make gains, sort of like how minimum wage doesn’t really have any positive effect because everything just gets more expensive.
Either Mr. Czachor’s claims are total BS of he is totally incompetent; I see you are not arguing with that fact.
If legislation didn’t “pick winners and losers” there would be a lot of empty offices on K Street.
Back to the real world:
Tariffs impact economic activity, government revenue and national security. Steel and aluminium are strategic resources. That fact may be meaningless in a globalist libertarian ideology but it isn’t meaningless to me.
Canada and Mexico have been exempted. Other countries may negotiate. Also, a 25% steel tariff does not imply that all domestic producers will hike all their prices across the board at the full 25%, there is still domestic competition. The dust hasn’t settled yet.
I would sincerely like to see justification for this claim. I truly find it hard to believe. Does this include peripheral domestic jobs created by new construction, equipment, local business near re-vitalized plants etc.? Are all of these 60 jobs domestic or is this a global figure? I have heard that the new tariff would increase the cost of a domestically built auto by about $125. If this is close to true I can’t see any significant impact on this part of the economy.
“Dumping” was explained to me this way. Suppose you can manufacture widgets for $5 and sell them for $6, making $1 profit. Now you find an entirely unrelated market, typically a different country. You sell this separate market widgets at cost. Economies of scale drive your costs down to $4. You neither make nor lose any profit in the market you’re dumping on. But you’re now making $2 profit instead of $1 in your original market.
If China and others really are dumping on our market, it’s good for them but bad for us. If tough talk and negotiations have failed to stop it, then tariffs might. Hopefully they’ll cause the dumpers to sue for peace instead of retaliate. Then we can get rid of the tariff in exchange for no dumping.
Let the free market ring! Tariffs may be temporarily necessary to make dumpers play fair.
It shouldn’t happen, just like how Obamacare shouldn’t have happened.
You can’t use prexisting BS, to excuse yet more BS. That’s just admitting you’re in the wrong & don’t care.
And innovation adoption. Tariffs can’t tell the difference between an advantage because labor cost, or an advantage because new process, and it has frequently slowed our own adoption of new processes being adopted.
When Brazil did this for their “computer industry” they stagnated technological adoption by a decade.
No old dog, you don’t know what you’re doing.
A truism that you cannot use as a cudgel to promote nonsense.
We aren’t at risk of seeing these things cut off, domestic production of both these things far outstrips military demand, while intervening to protect companies is a known moral hazard, where we’ve socialized their bottom line, to no benefit to the consumer or the nation.
Quit naming platitudes, go read history and see for yourself has this works out in reality:
History, past experience, illuminates the truth here.
I can see the author’s point on this. American steel companies probably have been selling at an unhealthy low price to be competitive. This leaves little money to keep their equipment current and give competitive raises.
But with the tariff in place, of course they’ll raise their prices to give themselves some breathing room. And they’ll be healthier businesses as a result. It’s the job of every corporation to provide a profit to investors. (Think about your 401K.)
If we loose our last beer keg factory, that will be bad, but factories go out of business and new ones spring up all the time. I don’t consider beer kegs a crucial industry.
Is the U.S. government’s job to provide a profit to investors?
A capitalist believes that factories go out of business when no one wants to buy a good in a free market where politicians do not decide what we should or should not find. I find it concerning when conservatives, the alleged capitalists of our nation, don’t care when government policies rather than a free market attempt to dictate our economic choices.
As a capitalist, I believe beer kegs are exactly as crucial as folks are willing to trade them. Same with steel and everything else made using steel.
I’m thinking, “What good is it if the politicians keep driving up the cost of everything?”
“According to 2015 Census data, steel mills employed about 140,000 Americans and added about $36 billion to the economy that year, but steel-consuming industries employed more than 6.5 million Americans and added $1 trillion to the economy. In other words, for every steel-producing job in the country that might benefit from Trump’s proposed tariffs, there are 46 jobs in steel-consuming jobs—and each of those jobs will get a little shakier if Trump’s tariffs become reality.”