It works.

The Section 232 tariffs have begun to resurrect the U.S. steel and aluminium industries, as existing U.S. steel and aluminium mills prepare to reopen or expand production. There is a sudden resurgence as U.S. steelmakers rally. Reports indicate that the U.S. steel industry may return more than 7,000 jobs—nearly 40% of the 19,000 steel jobs lost in 2015 alone.

But it’s not all good.

While no one can argue the benefits of job creation, one can certainly wonder whether the U.S. economy is losing more than it is gaining. The protectionism accorded by Section 232 has increased steel prices in the U.S., disrupted supply chains, dampened consumer sentiments across steel end-user sectors, and incurred retaliatory tariffs on U.S. exports.

Some backlash felt by U.S. steel companies.

There were some unexpected backlashes against U.S. steel manufacturers, particularly manufacturers who have been leveraging on globalization as a strategy for cost-efficiency. Not only does Section 232 slow global trade, it slows down globalization as well.

The net cast by Section 232 is too broad.

The tariffs are too broad and affect U.S. steel imports that are not manufactured within the U.S. in the first place. Downstream steel using manufacturers who depend on such imports to run their businesses have become collateral damage in this ordeal. This also impacts the exporting country.

What happens next is much more critical.

Section 232 is reviving an older, retooled U.S. steel manufacturing industry which has lost some of its competitiveness to modern steelmaking newcomerslike China. Quoting Scott Paul, president of the Alliance for American Manufacturing:

There won’t be steel mills operating in every town in the U.S. anymore. The peak steel output for the U.S. was 1974. But it is possible, with improved trade policies, to have an industry that is regularly adding new jobs, operating at a higher rate of capacity, and that allows for future investment. That’s a future I could imagine.”
—Scott Paul

The truth of the matter is tariffs are not a good long term solution for the steel industry. If Section 232 is not a political gambit, then whether doubling down on the nationalism warpath presents the best way forward for the U.S. steel industry, only time will tell.

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