Monday, March 12, 2018

The Absurd National Security Defense Arguments for Tariffs on Steel and Aluminum

By Robert Wenzel

In my forthcoming book, Foundations of Private Property Theory: Anarchism for the Civilized Person, I argue that there is no need for "national" defense that such defense is best left to the private sector.

Putting this theme aside for the moment, it is particularly bizarre that justification for tariffs on steel and aluminum are being made by tariff supporters on national defense grounds.

Case in point. In today's New York Times  Daniel McCarthy, editor of Modern Age: A Conservative Review, writes:
Economic nationalism differs from free-trade ideology in having three distinct goals rather than one. The first isn’t discussed very often in a time of relative global peace: maintaining the industries necessary for prevailing in a large-scale war. The Civil War might have had a different outcome had the North not possessed an overwhelming advantage in industrial capacity over the Confederacy.
But, in the United States,
somewhere between 80 million tons and 90 million tons of steel are made annually. The Pentagon advises that in a large scale war 3 million tons of steel would be required annually. In other words, there is just plenty of steel already made in the United States to support a war effort.

As for aluminum. You can't manufacture aluminum without bauxite. Bauxite is a naturally-occurring ore from which alumina and aluminum are produced. There has not been a bauxite mine in the United States in over 30 years.

That is, you are not going to fully produce aluminum in the United States without domestic mining of bauxite and no one is calling for tariffs on bauxite because the tariffs would have to be so high to induce domestic bauxite production that the aluminum industry would collapse. In time of war, as now, the U.S. would be dependent on outside sources for bauxite, a tariff on aluminum is not going to change this. It should also be noted that of the top bauxite producers, two of the top three, Australia and Brazil, are not countries the U.S. is going to go to war with anytime soon in anyone's scenario.

Further, according to the Defense Department. aluminum requirements for the military in time of large-scale war would be 3% of current U.S. aluminum production (after the bauxite is imported into the country).

The national defense arguments for tariffs on steel and aluminum, thus, are complete nonsense. It is simply tariff propaganda that doesn't fit the facts.

Robert Wenzel is Editor & Publisher of and Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics and on LinkedIn. His youtube series is here: Robert Wenzel Talks Economics. The Robert Wenzel podcast is on  iphone and stitcher.

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