Don’t worry about Trump’s tariffs

Start with something everybody agrees upon: Global steel and aluminum sectors have large amounts of excess productive capacity. The problem is large enough that last year the Organization for Economic Cooperation and Development issued a report on global excess steel capacity.

Generally, excess capacity pushes down prices, and less efficient firms that cannot make profits at these lower prices simply go out of business, pulling down capacity until it matches demand. But foreign producers of steel and aluminum, efficiently or not, have often been insulated from this competitive winnowing by government industrial policy that props them up — a fact bemoaned by both the G-20 and the Obama administration.

The proposed tariffs can provide a countervailing force against these foreign subsidies and protect American metal producers until a comprehensive solution is found. Am I confident that the Trump administration will back a smart and efficient solution to the larger problem? Not really — but this doesn’t mean we shouldn’t be happy to have some breathing room to find one.