The casualties of Trump’s trade war

How ‘America First’ often puts the West last.

 

The story of the Colorado Fuel and Iron Company in Pueblo, Colorado, is a classic tale of American industry. It was founded in the late 19th century, and its mines, forges and quarries grew into a company of 15,000 people and the largest steel mill in the West. Yet even this behemoth, once part of the Rockefeller empire, could not endure. When the Reagan administration toppled barriers to free trade in the 1980s, CF&I bowed to foreign competition. It declared bankruptcy in 1990, almost a century after its founding, only to reboot as a shadow of its former self, the Rocky Mountain Steel Mill.

Flames fill the room at EVRAZ Rocky Mountain Steel in Pueblo, Colorado, as steel is processed in an electric arc furnace.
Joe Amon/The Denver Post via Getty Images

When President Donald Trump levied tariffs this spring on imported steel and aluminum and then picked a trade war with China, he was hoping to throw a lifeline to iconic American companies like Rocky Mountain. His protectionist policies may help that particular mill, but in today’s economy, in which “local” industries are so often inextricably entangled with global supply chains, Trump’s tariffs and the resulting blowback are already hurting a lot of other Westerners.

Theoretically, tariffs help U.S. companies by slapping a tax on imported goods so that they are no longer cheaper than domestic ones. Retailers are then more likely to purchase domestic goods, thereby supporting U.S. manufacturers.

Freeze the frame there, and Trump can claim victory. Yet this false sense of triumph relies on a simplistic worldview, in which shipping containers full of imported products flood American ports and then return empty to their points of origin. That’s not the case. In fact, goods move back and forth across a complex — sometimes illogical — global web of markets. The U.S. imports 10 million barrels of crude oil and petroleum products each day, for example, then turns around and exports up to 8 million barrels of the same stuff overseas. American producers ship seafood to China for processing, and then it’s sent back to American consumers in the form of fish sticks and other products. Tug on one strand of the web, and it inevitably reverberates in unforeseen ways throughout the rest of it.

Tariffs are essentially a tax levied on foreign goods but paid by consumers in the form of higher prices. That means people buy fewer of those goods, and that eventually hurts U.S. distributors, transporters and retailers. In some cases, the negative effects ripple even further down the supply chain. Tariffs on imported clothing, for example, can hit U.S. cotton farmers, since many “Made in China” shirts are woven from American cotton — the U.S. ships 600 million tons of cotton each year to China alone, and another 3 billion tons to other overseas markets. Tariffs on steel and aluminum might help companies like Rocky Mountain Steel, but they hurt all the other domestic industries that rely on those materials.

In July, China fired its own retaliatory volleys in the trade war: It slapped tariffs on the 1.17 million metric tons per year of hay Chinese consumers had purchased from California, Washington, Idaho and Arizona, dealing a sucker punch to Western farmers. China was the biggest market for U.S. soybeans and also a major purchaser of U.S. beef and high-end Alaskan seafood — all of which now have new duties on them. Now Chinese consumers are looking to other countries to supply these goods, and U.S. farmers, ranchers and fishermen are set to suffer. Other countries are also reacting to Trump’s steel and aluminum tariffs. Mexico has put a duty on American potatoes, cheese and apples, which will hurt Idaho and other Western states, while the European Union is threatening to put tariffs on U.S. whiskey and bourbon, which are tremendously popular there.

View Colorado Fuel and Iron Works' blast furnace row and rail yard before the steel mill was fenced.
Image courtesy Steelworks Center of the West, Pueblo, CO

In response, Trump’s Department of Agriculture is offering $12 billion of taxpayer money to some of the farmers that have been hurt by the very trade war that Trump himself started. In other words, in his attempt to shrink the trade deficit, he’s growing the federal budget deficit. Though details are scant so far, the relief package provides no help to Alaska’s seafood industry, nor does it offset the pain suffered by Western hay farmers or others caught in the crossfire. The program forces the Trump administration to pick winners and losers, and it’s a safe bet the winners will come from mid-term election battleground states, especially in the Midwest.

Perhaps those who miss out on the aid can take some comfort in knowing that there are some winners in this scuffle. One of them is none other than Rocky Mountain Steel, which will benefit from the tariffs slapped on foreign competitors. There’s just one catch: The steel mill today is a wholly owned subsidiary of Evraz — a Russian company. One of its top shareholders is Roman Abramovich, a Russian oligarch who has close ties to Russian President Vladimir Putin — and allegedly gave him a $35 million yacht. Abramovich is also chummy with Trump’s daughter, Ivanka, and son-in-law, Jared Kushner. “America First,” indeed.

Jonathan Thompson is a contributing editor at NewTowncarShare News. He is the author of River of Lost Souls: The Science, Politics and Greed Behind the Gold King Mine Disaster.

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