Minarchic Anti-Communist

I frequently see this objection to tariffs: "yes, they help the steel industry, but at the expense of everyone else who uses steel." The idea is that tariffs harm manufacturing by making input prices go up. It's an intuitive argument, but ultimately not a persuasive one. As Charlie acknowledges, tariffs have returned the steel industry to profitability, attracted new investment, and allowed the industry to expand capacity. With this new investment and capacity, supply will increase and prices will decline. That's how tariffs work and have always worked. It takes some time, but anyone who follows the steel industry knows it's happening. There is a hangover period where prices have increased in response to the tariffs but the new investment attracted by the price signal hasn't yet added new capacity. That's a tough period politically, and we're in it now with most industries. This gives teeth to the argument that input prices have gone up, because there isn't yet anything concrete to show for it. But consider this: almost every product is an input for something else. Steel is an input to machined parts that are an input to combustion engines that are an input to cars, which themselves have hundreds of discrete inputs. If we want to reindustrialize, we want what's happening to steel to happen to each stage of this supply chain. If the principle is "don't tariff inputs," you cannot drive the investment and capacity expansion mechanism in the manufacturing sector as a whole. You will onshore only the low-value assembly of finished goods using imported parts, which China's massively subsidized industrial champions will supply because they don't need to earn a market return to stay in business. If China can drown a given sector in cheap imports whenever it wants, that sector becomes un-investable and the market will not deliver new capacity. If our goal is to broadly reindustrialize, you simply can't get there by only tariffing finished goods. You need to tariff industrial inputs. Doing so allows the cycle of price increase -> profitability -> investment and capacity expansion -> price decrease to work across the entire supply chain. The same expansionary cycle benefitting the steel industry can then benefit the machine tooling, engine manufacturing, and auto industries in turn. That's when you find yourself with a robust and profitable manufacturing sector instead of a small slice of finished goods assembly. Finally, just to put the cost increases in perspective, the Boston Fed estimated that 2025 tariffs increased input prices for domestic producers by an average of 1.1%. The figure was higher - specifically between 3 and 5% - for steel-using industries like motor vehicles, electrical equipment, and machinery. This matters, but it's far from a tariff-induced death blow to industry, which is the impression many seem to have. bostonfed.org/publications/c…