The Rise and Fall of an Industrial Giant
The lack of tariffs on foreign steel led to the downfall of American steel. We watched as plants closed and people lost their jobs amid a significant decline in the domestic industry's global competitiveness.
Augustus Wolle founded the Saucona Iron Company in 1857 in Saucon Valley, Pennsylvania. The company moved to Bethlehem in 1861 and rebranded as Bethlehem Steel Corporation in 1903 under Charles Schwab’s presidency. Schwab elevated the company to new heights, making it a manufacturing juggernaut instrumental in shaping American infrastructure. Bethlehem Steel became the largest munitions supplier for the Allies during WWI and produced more ship tonnage than any other US company in WWII.
Bethlehem Steel was foundational to constructing American icons. The company's steel formed the backbone of 80 percent of the New York skyline, including landmarks like the Empire State Building, George Washington Bridge, Madison Square Garden, and Rockefeller Center. Landmarks outside New York included the Golden Gate Bridge, Hoover Dam, and the US Supreme Court Building. Throughout the 20th Century, Bethlehem Steel exemplified American industrial leadership.
The landscape shifted in the 1970s and 1980s as cheaper steel imports from emerging markets, including China, began flooding the US market. Asian governments subsidized their steel production, and their imports were priced lower than American steel. Bethlehem struggled to compete due to its older plants, higher labor costs, and stricter domestic environmental regulations compared to those in emerging markets. The company faced layoffs and plant closures.
Globalization intensified in the 1990s with the North American Free Trade Agreement (NAFTA) and the prospect of China joining the World Trade Organization. By 2001, unable to innovate or modernize, Bethlehem Steel filed for bankruptcy. In 2003, International Steel Group Inc. acquired the company. Pennsylvania redeveloped the former Bethlehem Steel site into a mixed-use facility featuring a casino, museum, and cultural center.
Today, Bethlehem Steel's legacy continues to inform ongoing discussions in America regarding trade policies, national security, and our economic future, particularly in debates concerning tariffs with China. This history serves as a critical lesson in the consequences of unprotected industries and the importance of thoughtful trade policy.
Current Debates on Tariffs and Environmental Policy
Tariffs are traditional tools for protecting domestic industries, but they also have the potential to address global environmental challenges.
The Wall Street Journal on April 17 reported that President Biden intended to significantly increase tariffs on Chinese steel and aluminum products. The proposed tariffs, which would more than triple the current rate to 25% from 7.5%, are part of a broader strategy to protect domestic industries. This move follows the tariffs imposed by President Trump’s administration, further fueling the ongoing debates on trade policies and the steel industry.
There is strong concern about Chinese manufacturing goods flooding the market. To attempt to kickstart its economy, China is pushing cheap goods onto other countries. On April 19, WSJ reported that in the past year, “China exported 95 million metric tons of steel…a sum that exceeds estimates for total U.S. steel consumption in all of 2022.” Experts liken this surge to the early 2000s, which cost the US around two million manufacturing jobs.
We consider tariffs vital to maintaining US manufacturing jobs, capability, and competitiveness. However, another critical aspect often overlooked in discussions about tariffs is the economic cost of climate change.
We debate the cause and impact of climate change, but we can’t debate that it is happening. Some argue that man-made emissions from activities such as burning fossil fuels are the primary cause. They emphasize human activity's impact on increasing greenhouse gas concentrations in the atmosphere. Others contend that natural phenomena like wildfires and volcanic eruptions are more influential.
No matter your opinion of the cause, the effect is proven. The Earth is warming.
To connect the discussion on tariffs and climate change, we need to make a couple of assumptions. An assumption is a premise or starting point accepted as true for the purposes of argument or investigation.
First, we assume that humankind burning fossil fuels causes a buildup of greenhouse gases, which warms the Earth. The scientific community widely supports this position.
Second, we assume that imposing tariffs on imported goods from countries with less stringent environmental regulations could incentivize these countries to adopt cleaner, more sustainable manufacturing practices. Historical precedents in environmental economics show that economic incentives drive substantial policy changes and technological innovations in manufacturing.
These assumptions allow us to explore the potential that tariffs, traditionally seen as instruments of economic policy, can also be strategically used to encourage stricter global environmental standards.
Proposed Solutions and Global Cooperation
Climate change has a high cost to American taxpayers in real US dollars.
The January 2022 Deloitte Economics Institute report, The Turning Point: A New Economic Climate in the United States, found that inaction on climate change could “result in economic losses to the US economy of $14.5 trillion (in present-value terms) over the next 50 years.” Preventative measures like tariffs could be economically beneficial in the long run compared to the costs of climate inaction.
Starting in the 1960s and 1970s, America exported manufacturing jobs overseas, often to countries with less stringent environmental practices. Jack Welch and General Electric (GE) were at the forefront of this movement, leading the American push to offshore jobs to maintain a competitive edge. As more American companies joined the trend, it eroded US manufacturing capability and inadvertently contributed to the increase in global greenhouse gas emissions.
That was our moment to save Bethlehem Steel. Instead, we chose to export our manufacturing base overseas. Had we implemented protective tariffs during the 1960s and 1970s to level the playing field for American manufacturers, some of those jobs would have stayed here. Those companies would have had better environmental practices, potentially reducing overall global emissions. Instead, when we sent manufacturing abroad to countries with little or no environmental regulations, we increased the level of greenhouse gases in the global environment.
Tariffs today could still make a difference and influence environmental policies abroad. Imposing tariffs on goods produced with poor environmental standards encourages sustainable manufacturing practices worldwide. They would reduce the market for goods made with poor practices.
These proposed tariffs aren’t intended to be punitive. By setting higher standards for imported goods, we aim to elevate global manufacturing processes to promote a cleaner, more sustainable manufacturing sector worldwide.
Strengthening environmental standards through tariffs helps combat climate change and boosts the competitiveness of American businesses. By ensuring that foreign manufacturers meet high environmental standards, we level the playing field for American companies that already adhere to strict regulations. This dual benefit of protecting the environment while leveling the playing field for American businesses is a point on which both political parties can agree.
As an additional benefit, working with global partners to establish this standard would make American businesses more competitive at home and abroad. The effort would keep more jobs here at home.
Challenges and Mitigation
We can mitigate the approach's downsides, but higher tariffs will cause short-term economic adjustments. Countries affected by the tariffs could respond with retaliatory tariffs. Tariffs generally lead to higher prices for imported goods, which are passed on to consumers. Determining and monitoring the environmental standards of manufacturing practices in other countries can be challenging. These tariffs could strain diplomatic relations, especially with major trading partners.
The long-term benefits of sustainable economic growth, reduced climate impact, and improved global health far outweigh these initial challenges.
We should have saved Bethlehem Steel and American manufacturing in the 1960s and 1970s. Instead, we exported our manufacturing overseas.
When we sent manufacturing abroad, companies chose to make goods using poor environmental practices.
Climate change has a high cost to American taxpayers in real US dollars.
We missed our chance to save American manufacturing and environmental health with tariffs. But the best time to build a future that values economic prosperity alongside environmental integrity is now.
We shouldn’t increase tariffs on Chinese steel because it’s Chinese. We should increase tariffs on all manufacturing goods that aren’t made to the same environmental standards as American goods.
May God bless the United States of America.
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