In 2002, President Bush Imposed 30% Steel Tariffs; This Is What Happened Next

In an eerie analogue of what is about to take place, on March 5, 2002 President George W. Bush imposed tariffs as high as 30% on global steel imports.

The temporary tariffs of 8–30% were originally scheduled to remain in effect until 2005. They were imposed to give U.S. steel makers protection from what a U.S. probe determined was a detrimental surge in steel imports, as more than 30 steel makers had recently declared bankruptcy. Canada and Mexico were exempt from the tariffs because of penalties the United States would face under NAFTA. Additionally, some developing countries such as Argentina, Thailand, and Turkey were also exempt.

The response was immediate.

Domestically, some of the president's political opponents, such as Democratic House Representative Dick Gephardt, criticized the plan for not going far enough. For some of the president's conservative allies, imposing the tariff was a step away from Bush's commitment to free trade. Critics also contended that the tariffs would harm consumers and U.S. businesses that relied on steel imports, and would cut more jobs than it would save in the steel industry.

The international response - like now - was more vocal.

Immediately after the announcement, the European Union announced that it would impose retaliatory tariffs on the United States, risking the start of a major trade war. To decide whether or not the steel tariffs were fair, a case was filed at the Dispute Settlement Body of the World Trade Organization (WTO). Japan, Korea, China, Taiwan, Switzerland, Brazil and others joined with similar cases.

In a decisive decision, on November 11, 2003, the WTO came out against the steel tariffs, saying that they had not been imposed during a period of import surge—steel imports had actually dropped a bit during 2001 and 2002—and that the tariffs therefore were a violation of America's WTO tariff-rate commitments. The ruling authorized more than $2 billion in sanctions, the largest penalty ever imposed by the WTO against a member state, if the United States did not quickly remove the tariffs.

In retaliation, the European Union threatened to counter with tariffs of its own on products ranging from Florida oranges to cars produced in Michigan, with each tariff calculated to likewise hurt the President in a key marginal state.

But it was the market's response that broke the camel's back: what followed immediately after the tariffs were announced was a 30% plunge in the S&P 500, a slump in the dollar and a rally in bonds that slashed 10Y yields in half.

After receiving the verdict, both from the market and the WTO, the United States backed down and withdrew the tariffs on December 4, 2003.

Comments

Bes Gaius Frakkin'… Fri, 03/02/2018 - 09:38 Permalink

the manufacturing jobs will only come back when:

1. Americans become the slave labor

or

2.  There is enough pork lining the pockets of the oligarchs

and not a moment sooner

-------------

American companies are making the vast majority of profits going to "overseas" companies

it's a fake trade war and only going

to make your stuff way more fucking expensive

over the cliff bitchez

In reply to by Gaius Frakkin'…

tmosley stizazz Fri, 03/02/2018 - 11:33 Permalink

Tariffs don't work in a high regulation economy. Need a low regulation economy so new businesses can sprout up and benefit from the protection provided by the tariffs while they scale up large enough to stand on their own.

In reply to by stizazz

TruthHammer tmosley Fri, 03/02/2018 - 11:38 Permalink

Free Trade with the third world was always a disaster short term gain for long term catastrophe.

It's time to rebuild America, stop subsidizing the third world and propping up bankrupt 100x leveraged wallstreet.

The US needs to restore its manufacturing base yesterday, and the tiny tariffs on metal are just the start.  No matter how mad Russian Tyler gets, the US is going to restore its strength, and flush neo-con corporatist globalism down the drain.

In reply to by tmosley

TheGardener TruthHammer Fri, 03/02/2018 - 14:54 Permalink

"the US is going to restore its strength, and flush neo-con corporatist globalism down the drain."

 

Good wishful thinking and conclusion to end your comment.

But you are mostly wrong . Free trade with the Third World is an euphemism for

ruthless resource extraction at minimum cost. Throw them into debt indenture for

good measure too by means of blackmailing by IMF and World Bank debtor (slave) in possession loans and send in the locusts NGO`s to keep them as down as it gets.

What you probably meant to refer to was developing nations who actually do produce

more than their own shit . Like China for example and where malign US corporations

have outsourced their production to. Your 800 dollar latest I-phone gets produced for less than 50 bucks in China with 3 dollars profit taxed at 30 cents there. Apple pays another 30 cents on the 750 dollar profit or so it seems by market evaluations of their stock.

But please put in tariffs on steel , environmental friendly cars will have to do without it

anyway because of weight and all that pollution from the furnaces ...

What is going to revive a healthy 50thies economy ? Your leaders have a plan like

back in the day and the only viable export the US still has today is war if anything.

And don`t mock "Russian Tyler". This is not funny and you are on his virtual private property.

 

 

In reply to by TruthHammer

desPOTUS TheGardener Sat, 03/03/2018 - 04:27 Permalink

the US 'elites' made a deliberate decision to offshore manufacturing using labor arbitrage.

The US $ was accepted as reserve currency and its exported its inflation worldwide. 

now trump wants to reverse this and bring jobs back home when automation is driving manufacturing more.

whip up the base with a roar on Jobs & america first !

truth is its inflation first and then stagnation ! 

In reply to by TheGardener

jin187 tmosley Fri, 03/02/2018 - 15:34 Permalink

The real problem is how do we drag the stupids along for the ride when everyone else is performing skilled labor and services.  The days of getting a job that pays 3x the minimum wage with the skills of a trained ape are coming to an end.  A free market is about efficiency more than anything.  Bad publicity and protectionist lawmaking can force inefficiency for the purpose of redistributing wealth, but that slows overall growth.  Lowering the ceiling instead of raising the floor hasn't worked for 5000 years.  I doubt it will now.

This country has the ability to train most of its citizens to do jobs illiterate 3rd world garbage pickers can't do, but instead we keep trying to bring back the good ol' days of doing remedial work for above average pay.  Make the last 2-3 years of high school optional, and let them go into trade school instead.  Once our high schools are pumping out IT guys and tradesman instead of blazed out Democrat zombies, this problem will disappear, and it'll be the burger joints and maid services that can't find workers.

In reply to by tmosley

Angelo Misterioso Bes Fri, 03/02/2018 - 10:38 Permalink

1. Americans become the slave labor - - your comment sounds terrible but the reality is that 99% of the population needs and wants to be told what to do each day - they need a mundane, low-IQ, low-energy, repetitive job they can go to and earn a modest paycheck.  Believe it or not, that is comforting to them and they actually like it.  As soon as you free them of this, via SNAP and other govt transfer payments, they don't know what to do and they spin out of control. Apparently many become opioid addicts to fill the vacuum... I am not saying this is right but it appears to be the case....

 

so we can keep printing a trillion $ per year to spread around or we can try to bring back these mundane jobs and try to get those 100 million sitting on the sidelines to actually do something....let China have a turn at the epidemic...

In reply to by Bes

earleflorida cheka Fri, 03/02/2018 - 12:44 Permalink

funny that months before baby bush had given china entry into the 'WTO' (dec. 11, 2001 [exactly two months after '911]) with favored trading status (this was done to pay for the 2003 invasion of Iraqi war) as China came in and bought our debt to satisfy FX.

as I said, a few months later he (POTUS Adm.) starts a trade war, knowing quite well the markets would tank. Its a no-brainer---... and what makes the public moar concerned about anything (geopolitics/war aside) than their personal pocketbook.

thus in 2003 he drops the tariff trade war and all is well with the economy and gets his war with Iraq saying its cost would be at most $300 bln. max. and a short war...which always adds to the balance sheets bottom line.

~think syraq and the tripartite's 'big barter'`

In reply to by cheka

Kayman Bes Fri, 03/02/2018 - 10:58 Permalink

Steel and Aluminum are strategic metals. The US has been plain stupid and/or its politicians entirely corrupt to let these industries die while foreign enemies (China) grow exponentially.

And it is a simpleton's argument to state China is only the 10th largest steel importer into the U.S.  Billions of dollars of Chinese parts enter the US directly or through Canada and Mexico (NAFTA).

And China is crowding all other steel producing countries out of other markets, forcing them to move their steel into the US market.

When the lord was passing out brains, you must have thought he/she said "trains".  "I take the next one."

In reply to by Bes

GoingBig Kayman Fri, 03/02/2018 - 11:09 Permalink

Its funny to see how limited many people think on this subject. We are in a global economy and there is no going back. Sorry about that MAGA's but it is the truth. Steel and aluminum were strategic resources 100 years ago but not now. They are commodities that can be sourced from anywhere. That is why Brazil is now a huge steel producer. Super cheap labor.

The US is much better at producing the higher value added items like high tech, aerospace, computers, chips, etc. 

Trump wants to go back to 1900 and pretend everything is steel and coal. What the fuck is wrong with this dude? Oh thats right, he doesn't read and he doesn't take anyone's advice. 

In reply to by Kayman

brianshell GoingBig Fri, 03/02/2018 - 11:17 Permalink

First, at some point, America gave up its sovereignty to the WTO. Bad idea.

Second, if America wants to continue to impose its will by military prowess, it might not want to be limited to buying steel from our enemies.

As far as retaliatory tariffs, you can name many examples where American exports are subjected to huuge tariffs already. If we impose tariffs, it can be to balance the scales.

In reply to by GoingBig

TheGardener ktown Fri, 03/02/2018 - 15:20 Permalink

America has no products to offer to the world. Gunboat marketing still pushes a few brands but for a hundred years she could only compete on mass production only before it was moved to China.

Roll out full protectionism Trump (if not you , immune from blame from all sides,  who else would?) and force your will on America to make it great again or on a lesser tune as it used to be. I`d be all on board but please swiftly act on your promise and stop all foreign entanglements first and for good. No foreign wars, no troops on foreign soil and no foreign bases .  All cleared on your military action war side ? All clear on my trade war side.

In reply to by ktown

GoingBig brianshell Fri, 03/02/2018 - 14:20 Permalink

Brian, not to fart on your parade but the only country hurt by import tariffs will be US manufacturers. 

I'm not sure what part of economics class you skipped; was it macro or micro?  

Response to your first point - America did not give up its sovereign status to anyone let alone the WTO. We do many things outside of the ground rules of the WTO.

Second - Industrial manufacturers buy from whomever has the right quality at the right price. Right now the US doesn't manufacture as much as it needs, so we source from Brazil, etc.  Also, do you think US Steel is all of a sudden going to ramp up a new plant? 

Third - American exports can be subjected to large Tariff's but that is to the detriment of the importing country and commodities aren't exactly a huge bargaining chip. And please tell me because Im not exactly sure what country this is aimed at. Is it Brazil? Canada? US Manufacturers? It can't be China because they don't export a reasonable amount to the US. So what is this for again? Please explain. 

 

Trump doesn't think, and quite frankly, he is quite stupid. His cabinet is in disarray and the wheels are coming off the train. I think this is really bad for the US a whole. 

In reply to by brianshell

brianshell GoingBig Fri, 03/02/2018 - 15:09 Permalink

You see, sovereignty is a thorn in the side of globalism.

Alternatively, should you hitch your wagon to a global corporation?

Perhaps if we allow your logic to run its course, where the only law is by corporate litigation and humans have no rights and are only considered as consumers or human resources, then the world will be a better place? We shall see.

As to tariffs, do you know that many countries use them as a source of revenue to replace taxes on their own citizens?

In reply to by GoingBig

Endgame Napoleon TheReplacement Fri, 03/02/2018 - 14:08 Permalink

There sure as h** aren’t any DemoRATs left who put the interests of American breadwinner jobs first; there are no more labor Dems. We have the Uniparty (neoliberal) Dems, piling on layers of welfare / child-tax-credit welfare, trying recast the part-time Jobs for welfare-aided moms of the service economy as breadwinner jobs. To keep the charade going, the Uniparty RepubliCONs added even more child-tax-credit welfare to boost the refundable child tax credit over $6,444 for moms working part time to stay below the earned-income limit for monthly welfare, with their married-mom, part-time-working counterparts also getting bigly tax credits, making their paychecks bigger than the paychecks of Americans living on earned-only income who must care about this issue. Our full-time pay does not cover rent. It does not include add-on pay for sex and reproduction from taxpayers. Because of their unearned income for womb productivity, many of the DemoRAT’s low-income voters do not have to care how few of the jobs left on American shores pay enough to cover rent that absorbs more than half of earned-only income, while the Dems’ high-income voters concentrate the wealth from two high-paying jobs that could support two households, putting those jobs under one roof to increase keeping-up-with-the-Jones’ money, while others raise their children for them, and they don’t have to care, either. Many Americans do have to care, though. More and more, they are coming out of the woodwork, as automation reduces full-time jobs, exacerbating these trends, with almost every politician and newsperson in this country avoiding even discussing the real problems of 30 years ago, much less the ones of today. Most of them are too soaked in cronyism to do it.

In reply to by TheReplacement