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Steel and Aluminum Tariffs

Discussion in 'The Swarm Lounge' started by Whiskey_Clear, Mar 7, 2018.

  1. takethepoints

    takethepoints Helluva Engineer

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    Not really. See:

    https://www.bloomberg.com/view/arti...story-shows-how-america-lost-ground-to-europe

    The American steel industry had the world as its oyster until it quit innovating; a management decision and not forced by unions. Thorstein Veblen called it "the penalty of taking the lead". When a country finds itself in an essentially non-competitive position in any industry, it builds up a considerable investment in plant and equipment that would be a giant burden to replace. That's where the steel industry found itself after WW2: we were the biggest steel producer in the world and had the (soon to be outdated) plants to prove it. Our foreign competitors were prostrate – one way to avoid the penalty is to have your entire industrial plant blown to smithereens in a war – and had little to lose by trying to finally make basic oxygen furnaces, a very old idea, industrially viable. And the result was that they began to produce steel of all kinds at about half our costs.

    Did there management of American steel mills respond to this threat of competition? Of course not. Why do you ask? Hence the current situation.

    The rest of the post is correct. Tariffs on steel won't work to do anything but make consumers poorer and, in the long run, suppress demand for steel products.
     
  2. bwelbo

    bwelbo Helluva Engineer

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    I get the rest of your post, so I'm blowing right past that nodding. :D

    On this last part, it doesn't bother me. I want tariffs to be roughly equal on both ends. If someone can make a better product and we have a trade imbalance from that, so be it. But if all kinds of industries and consumers are able to buy things on the cheap because a company in another country can use child labor and/or have our products unfairly taxed, then we've all been unfairly living on the cheap. Consumers and suppliers.
     
  3. takethepoints

    takethepoints Helluva Engineer

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    4,122
    That is a real problem and one we could address with a better regulatory scheme for overseas investment. Trying to overcome rent-seeking by other countries by doing it ourselves isn't likely to pay off in the long run, however. Better capital controls might.
     
  4. smathis30

    smathis30 Helluva Engineer

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    More of an oversturation of college degrees. Technical schools are rising faster than ever and enrollment only hit people who could only afford for profit colleges. And it's effecting gen Z more than millenials. Has nothing to do with video games, just a relative to other times in history, a lot higher. A 1% decrease is after a 20% increase is still a 19% increase. It's leveling out to where it should and enrollment for people having difficulty finding jobs in areas that are over saturated in degreees that weren't needed 10-20 years ago. Public and private university enrollment is still increasing, its community college and for profit schools that are struggling and might die off soon.
     
  5. smathis30

    smathis30 Helluva Engineer

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    Poll include all people in college, who for obvious reasons can't pay of all their bills. If college prices inflation was the same as minimum wage it would be 24$/hr. Working a part time job and going through college doesn't cut it anymore.
     
  6. Whiskey_Clear

    Whiskey_Clear Banned

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    U guys need to start a separate “post secondary school and how old is too old to live with mommy and daddy” thread. :mooning:
     
    bwelbo likes this.
  7. smathis30

    smathis30 Helluva Engineer

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    Part of the reason is unions increasing wages that can't go to maintenance. Both are management decisions. Steel died in the 80s during the oil embargo which curtailed construction, not the 50s which is a hell of a long time for WW2 reconstruction to take hold. The largest steel exporters are also in Asia not Europe as they have never been a threat in the recent industry.
     
  8. takethepoints

    takethepoints Helluva Engineer

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    It wasn't maintenance, it was a failure to adopt new technologies. Well, take that back: one of the problems with the "penalty" is that you are stuck with a humongous investment that you can'r replace it; all you can do is maintain it. This doesn't have diddly to do with unions; the places that adopted basic oxygen furnaces were in Germany and Switzerland, two of the most highly unionized countries in the world. Japan also has a more active union movement too, albeit that they haven't outlawed company unions. We are sucking wind on metallurgy because we had the chance to innovate and didn't have the management vision to do it. And tariffs won't help one bit to restore that.
     
  9. collegeballfan

    collegeballfan Helluva Engineer

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    Yeah. Back in the good old days, 1960 - 1966, I had a summer job, Good Humor Ice Cream retail truck driver, that allowed me to save enough money to pay all my college and living expenses for the 9
    academic months. College costs have inflated beyond being able to do that, so the kids borrow money and supplement it with jobs.
     
  10. bwelbo

    bwelbo Helluva Engineer

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    A few years ago the federal government took over college loans, and now you don’t have to repay more than a certain percentage of your income. I expect college costs to continue to skyrocket, because all of these loans are now backed up by the federal government if the students can’t pay them.
     
  11. Whiskey_Clear

    Whiskey_Clear Banned

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    Take the college debate to its own thread please.
     
  12. MountainBuzzMan

    MountainBuzzMan Helluva Engineer

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    I don't understand some of the comments here about tariffs not helping due to outdated technology.

    I did a quick research and found that in 1960 90% of all the steel made in the US was by the inefficient blast furnaces and about 5% of steel came from oxygen furnaces. By 1975 those numbers changed to 20% blast furnaces and 60% was oxygen furnaces and the rest coming from electric arc furnaces for recycling of steel. Seems like there was a LOT of investment into new equipment.

    By 1995 there were 0% blast furnaces, 60% oxygen furnaces and 40% electric arc furnaces.

    So what am I missing? It seems like we are on level ground from an equipment standpoint.
     
    bwelbo and Whiskey_Clear like this.
  13. smathis30

    smathis30 Helluva Engineer

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    http://www.nber.org/chapters/c5960.pdf
    Looks about the roght. American steel hit its market peak in 1973 and then hit a market low in 1981 during the oil crisis. I'm not denying that technology made an impact, just that other things like labor costs as well made an impact. Steel doesn't go from #1 to #3 overnight (and Production was literally halved) because of technology. Supply and demand in the US because of the embargo just on the US do that. Prices had to be dropped to sell, and recessions hit construction hard, due to the higher renter share of markets.

    In 1976, when the emabargo hit, the US was paying almost three times what Japan was in labor at almost 150$/ton compared to their nearly 50$. And Europe was around 90$/ton. Labor was far and out the biggest cost differential between the biggest competitors. Automation may have helped, but it's asanine to think that the us COM for steel was almost twice that ofnother countries almost exclusively due to labor costs not being a key source of the problem.
     
  14. bwelbo

    bwelbo Helluva Engineer

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    16,384
    You had me until the very end. You just posted that the US was paying 2-3x in labor what other countries paid. And then you concluded that it would be asinine to think that the cost of materials for steel was almost twice that of other countries almost exclusively due to labor costs. First of all, I don't think anybody was using the word 'exclusively' although I admit to not watching this thread very closely. But I think labor costs are a material portion of nearly any company's cost structure. If you're paying 2-3x the labor as your competitors, you're in a world of hurt no matter what industry you're in.
     
  15. collegeballfan

    collegeballfan Helluva Engineer

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    I would agree with this and emphasize that "labor" means every dime paid to and for the employee. In the US employers are expected to pay heavily for the skilled worker, wages with overtime, FICA, medical & life insurance, 401K, scholly programs for kids, etc, etc whereas in Madeuptoria you may get by with paying wages only. So in Madeuptoria you can pay really high wages for the country because of being exempted for the bennies.
    (Know a guy who gets a quarterly bonus for wearing a pedometer. He has 3 kayaks, 3 expensive rod/reels and the most expensive fly rod on the river and 90% paid for by his employer.)
     
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  16. bwelbo

    bwelbo Helluva Engineer

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    Liked...especially for "Madeuptoria".
     
  17. smathis30

    smathis30 Helluva Engineer

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    They paid roughly the same for materials. Gas was mlre expensive and coal was slightly cheaper but the differences were still marginal compared to labor, which was still larger than all the other variable costs combined.
     
  18. smathis30

    smathis30 Helluva Engineer

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    In 2017, BEauroe of labor studies found that in 2017, benefits added to an average of 1$/hr for base employees and 3.50$/hr for management level positions. I'm guessing this has to do with benefit election, as most of the hourly people I manage don't really like 401ks as they would rather have the money now. The link I posted shows that American steel workers made almost 60% more per hour relative the the average manufacturing job than their foreign counterparts. That is to say, if the average manufacturing job made 10$/hr, Germany was paying her 12$/hr to steel, Japan was paying 10$/hr, and the United States was paying 19$/hr. It's most definitely a special interest pushing that as it was 120% of the average +-10% for every other country in the world.

    I also think it's a bit silly to think the IS pays more for benefits compared to countries that have 5 weeks paid vacation and paid paternity leave. In Germany, if you make 40k a year your employer pays 47k/year in benefits due to their pension, retirement, health insurance, etc. in the US some of those costs are pushed to the employees.
     
  19. bwelbo

    bwelbo Helluva Engineer

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    My insurance premiums have steadily risen every year for the last several years. This year they are (my costs and employer's costs) $28k/year. (With a $1500 deductible per individual, $3000 deductible for the family.) . They match something like 4% on a 401k, which is another roughly $4k lets say for round numbers. What's SS and Medicare just for round numbers off $100k - $12k? I'm already at $44k/year in benefits there (and I make > $100k, but just using that to make the math easy). On a percentage basis compared to my salary, that's pretty high. They don't track time off, so its not 2 weeks or 3 weeks or anything. I just get approval between me and my boss, I don't abuse it, and I don't take a lot of time off at once. I don't know what holidays are like in Germany, but we have tons of them here in the US. My company identifies 11 business days, so that's 2 weeks there. My point in all this is that I don't know that a place like Germany has a material difference in employment costs based on their time off policies and what-not. Its very difficult to compare, because I'm not a manufacturing employee either...but I would imagine a manufacturing employee would get these same holidays (New Years Day, MLK, Presidents Day, Memorial Day, July 4th, Labor Day, Thanksgiving+day after, Christmas Eve+Christmas). Do they have payroll taxes and what-not over there? I do know the individual has a tremendous tax burden (income, VAT, wealth) across most of Europe, so it could be that they bear that burden and not the employers.
     
  20. MountainBuzzMan

    MountainBuzzMan Helluva Engineer

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    In my original post, I was not sure if there was a more advanced oxygen furnace technology that I was missing that all the companies outside of the US were using.

    So to conclude the technology side of of this thread, even though there was a lot of pointing to the steel industry for a lack of updating to new technology, we can all now agree that that argument was in fact wrong.
     

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