We wrote about the economics behind the 25% tariff on Steel imports and 10% tariff on Aluminium imports to the United States earlier this year. One of the main justifications of the tariffs were that they will increase domestic production. Some statistics released earlier this week provide an answer to whether the tariffs have really increased domestic production.
Steel production in the U.S. has gone up around 10% over the past year. Capacity utilization has increased as well, is this down to tariffs or a buoyant economy? Probably both. A key thing to note here is that post implementation of the tariffs in June this year, the growth hasn’t been much, but the tariffs were being discussed for over a year now so looking at data for a year should give us an insight.
Aluminium production has gone up about 5% over the past year too, chart below,
Will this be used as a justification to impose tariffs on more goods? Possibly, it should be interesting to see factory price inflation to understand the impact of the tariffs for the U.S. over the next few months.