ITC Finds 301 Tariffs Paid by Importers, Not Consumers; 232 Tariffs Hurt Manufacturing

While the Section 232 tariffs increased domestic steel production by 5% and increased smelter utilization by about 15%, there was $3.4 billion less manufacturing across the most impacted metal consuming industries -- industrial machinery, cutlery and handtool factories; motor vehicle suspension and steering components; agricultural/mining/construction manufacturing, and metal fabricators, according to an International Trade Commission report.

The ITC, which was tasked with the analysis by Congress a year ago, did not estimate the economy-wide impacts of the Section 232 and Section 301 tariffs, because the request from the House and Senate Appropriations committees was a more limited request. Congress asked them to analyze how the tariffs had affected domestic manufacturers who had either competed with the imports, or who needed to buy the commodities that had higher tariffs.

The economists wrote in the report released March 15 that it "cannot be used to draw broad conclusions about whether the tariffs under sections 232 and 301 produced a net benefit for the U.S. economy overall." They also did not analyze whether the 301 tariffs produced changes in China's intellectual property practices or whether the increase in steel production contributed to national security.

At the height of the actions, $25 billion in goods were covered by Section 232 and Section 301 tariffs, but as some countries were exempted, products were given exclusions and quotas replaced tariffs. That number shrank. At the lowest point, $9.9 billion worth of goods were covered. (Most Section 301 exclusions expired before President Joe Biden took office in 2021 and have not been restored.)

The increase in domestic primary aluminum production and in steel production is a result of higher prices in the U.S. compared to the rest of the world, the economists found. Aluminum prices in 2021 were the highest in 13 years, though they did fall between 2019 and early 2020. The average monthly price for hot rolled steel increased 166% from 2017 to 2021; overall, steel prices increased about 2.4%, the report said. They did not model the price effects of the quotas, however.

"Although prices have increased globally since 2018, the increase has been much higher in the United States than elsewhere," the report said.

The price of steel and aluminum also was affected by antidumping and countervailing duty cases, they noted, as well as global economic impacts of the pandemic.

In its analysis of Section 301 tariffs, the ITC said that U.S. importers bore almost the entire burden of the 25% or 7.5% tariffs, depending on the product. "Hearing testimony suggests that many importers largely absorbed the higher importer prices through decreased profit margins without substantially increasing prices for final consumers," the report said. However, the economists did not do their own analysis of the price pass-through, as they saw it as beyond the scope of the congressional request.

Imports of Chinese items subject to the tariffs declined from $311 billion to $265 billion in 2021, the report said. Chemicals and related products make up 16.7% of the tariff list; textiles and apparel are 15.9%.

Overall, if products were covered by 25% tariffs, the volume of imports fell by about 50%, and if they were covered by 7.5% tariffs, they fell by about 15%, the report said.

Many of those imports shifted to other countries, but there was some domestic production growth in the industries that competed with goods covered by the tariffs. Furniture and cabinetmaking increased by 7.5%, the report said. Semiconductors and electronic component manufacturing increased by 6.4%; however, motor vehicle part manufacturing only increased by 3% it said.