The effect of tariff policy on the steel industry

Battles over protectionist policy lie at the center of policy debates over trade. The imposition of tariffs shapes the valuation of affected products and presumably guides the policy actions and the investment dynamics of many industries. Within the United States, no industry illustrates this debate more evident than in the on and off attempts to protect the steel industry.;This paper aims to impartially assess the effects of tariffs on the steel industry, and discover if tariffs have succeeded, failed or produced mixed results. Specifically, did the political actions taken by the federal government over the past 40 years help to support the industry? Did it help the "old guard" integrated steel mills? Did it help the "new" mini mills? Did it have any effect at all? Does a government, even one as powerful as the United States, have the political power necessary to create long-term success for an industry in the light of international competition?;I show that neither the "free market" argument, the "protectionist" argument, nor Samuelson's (2004) argument captures the full effects of tariffs on the steel industry. Tariffs can benefit industries that are in the process of expanding and investing so long as that industry already has a specific competitive advantage and possibly only in the short-run. However consistent with Ricardo's propositions, tariffs may not be useful to preserve established industries where labor costs rather than new innovation determine profitability. Furthermore tariffs have a declining effect suggesting that the power of protection is clearly not eternal.