A new analysis from the CATO Institute reveals that over six decades of protectionist policies have failed to revitalize the struggling U.S. steel industry, even as the Trump administration renews its push for tariffs on imports including Canadian steel.
Decades of Protection Yield Limited Results
The libertarian think tank in Washington, D.C. recently examined extensive government efforts to protect domestic steel production. Research fellow Clark Packard and research associate Alfredo Carrillo Obregon published their findings in a comprehensive report that questions the effectiveness of long-standing trade restrictions.
The United States has essentially showered the domestic steel industry with everything it's asked for over the last 60 years, said Packard in an interview with the National Post. But unfortunately, it's not in a better competitive position.
Historical Context and Global Shifts
The report traces the industry's decline despite continuous government support. Following World War II, the United States dominated global steel production, manufacturing more than half of the world's steel in 1950. However, as Germany and Japan rebuilt their economies, they rapidly adopted productivity-enhancing technologies that made them increasingly competitive.
As U.S. steel companies saw their sales decline, the domestic industry repeatedly petitioned the government for more protection. This pattern has continued through multiple administrations, with President Donald Trump's recent visit to US Steel - Irvin Works in Pennsylvania highlighting the ongoing political support for protectionist measures.
The Cost of Protectionism
According to the CATO analysis, the fundamental problem with protectionist policies is that they increase costs throughout the manufacturing ecosystem. We can increase domestic steel capacity with all kinds of quotas and tariffs, Packard explained, but it doesn't change the fundamental dynamic that this increases costs in the United States for steel, both domestic and imported.
Carrillo Obregon emphasized that protectionism seals you off from competition, whereas in a free market, you have to innovate and constantly be on your toes to offer the best product available. The reality is that tariffs are not going to change the fact that some companies have struggled to innovate and to catch up in terms of modernizing.
The researchers noted that while protectionism might benefit steel producers in the short term, it comes at a high cost to manufacturers who rely on steel as a fundamental input. This ultimately undermines the broader manufacturing sector that the policies purport to protect.
