Costs and benefits of tariffs

This article reports on the costs and benefits of recent increases in tariffs on steel. Here are some money quotes.

1. The "Commerce Department ... impose[d] tariffs in response to an oversupply in the steel industry, especially from China. Some duties are as high as 266%." 
2. "Steel imports into the U.S. during the first quarter of 2016 fell to eight million metric tons, down 29% from a year earlier, and inventories also declined."This spring, major U.S. producers sent out a flurry of letters announcing nonnegotiable increases in prices. On April 15, for example, U.S. Steel Corp. wrote to its customers that 'effective immediately, base pricing for all new flat-rolled product sport orders is increased by $60 per ton.'" 
3. "That is helping American producers. U.S. Steel’s share price, for example, has nearly doubled since Jan. 1." 

U.S. Steel Tariffs Create a Double-Edged Sword
by: John W. Miller
Jun 01, 2016
Click here to view the full article on WSJ.com

TOPICS: International Trade

SUMMARY: U.S. tariffs are boosting steel prices, helping American producers but raising costs for manufacturers.

CLASSROOM APPLICATION: Students can evaluate the effect of increased U.S. steel tariffs on the U.S. steel prices, the profits of companies that produce steel in the U.S., the U.S. consumers of products made with steel, and the U.S. producers of products made with steel.

QUESTIONS: 
1. (Advanced) What is the effect of the U.S. raising steel tariffs on the quantity of steel imported into the country? What is the effect on the quality of steel produced in the U.S.? What is the effect on steel prices in the U.S.?

2. (Advanced) What is the effect of the U.S. raising steel tariffs on the profits of manufacturing companies that use steel as an input in their manufacturing processes?

3. (Introductory) The article uses the term "fairly traded steel." Define fairly traded steel.

Reviewed By: James Dearden, Lehigh University