Economy

Professor Behind Trade Model Cited by Commerce Calls Bullshit

JM Ashby
Written by JM Ashby

The Department of Commerce under secretary Wilbur Ross justified its recommendation that Trump impose tariffs on imports of steel and aluminum by citing an economic model from Purdue University, but the professor who created the model is calling bullshit.

The Purdue professor, Thomas Hertel, spoke to Bloomberg's Businessweek and said the Commerce Department cherry-picked the data and only cited the good parts while leaving out all the bad.

More specifically, the Commerce Department's report did not even mention the jobs that could be lost downstream in industries that use steel and aluminum as input, such as the automobile industry, or the higher costs for consumers that may follow.

Hertel isn’t claiming the department used Purdue’s computer model incorrectly—more that it was parsimonious in what it released to the public. The Commerce document predicts gains for makers of raw steel, but says nothing about the losses that would be suffered by consumers or by companies that make things from steel. (For some reason, the department’s document on aluminum doesn’t cite the Purdue model.)

“When you’re hellbent on implementing a particular policy, you’re selective in what you listen to,” Hertel says. In case it’s not clear, he thinks the tariffs are a bad idea: “It’s hard to think of a policy that has such widespread opposition, and yet a president went ahead on it.”

I wouldn't call this surprising -- Republicans love to cite the work of experts who don't actually agree with them -- but here's something: Trump's tariffs could actually further decrease the cost of steel and aluminum according to the same model cited by Commerce.

Trump’s tariffs are likely to worsen the global overcapacity that’s led to today’s punishingly low prices for steel and aluminum. First, because the tariffs are designed to induce American mills and smelters to ramp up their production. Second, because Canada and Mexico, which are temporarily spared from the tariffs, are likely to ramp up their own production to sell more to the U.S. market now that other sources are facing duties, making them more expensive.

Tariffs implemented for the purpose of increasing the value of American metals actually backfiring and decreasing their value would be full-circle Trumpism.

It just occurred to me that this could be precisely what Trump's former economic adviser Gary Cohn was referring to when he accused Wilbur Ross of lying to Trump. Ross was effectively lying by omission by not telling Trump that tariffs will cost more jobs than they create.

  • muselet

    Tariffs are the economic equivalent of an assassin taking aim at his target through his own head.

    Donald Trump and Wilbur Ross don’t seem to care about the real-world implications of tariffs. Perhaps someone should sit them down and explain what happened after Senator Reed Smoot and Representative Willis Hawley ignored the real world.

    No good thing will come of the Trump Tariffs.

    –alopecia

    • Aynwrong

      These people think history is for dirty hippies.

    • Draxiar

      What they care about are the optics their own misinformed cursory thinking base will hear world be damned.

  • Aynwrong

    Anybody remember the Bush administration trying to redefining flipped burgers as a manufacturing job?
    https://www.cbsnews.com/news/building-blue-collar-8230-burgers/

  • David Greenberg

    Will the deplorables ever awaken to what’s happening to THEM. Probably just blame it on Hillary and Obama. They’re going to get what they deserve.

    • ninjaf

      Unfortunately, so are a lot of us who knew what was coming before we voted.

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    • swift_4

      My Aunt thinks Obama crashed the economy last time, and that these tax cuts will help her, even though she is trying to figure out why she got less this year than last (probably has nothing to do with the new code). And she thinks things are getting better. When the banks destroy the economy again, I’m going to have to have her write “Donald Trump is President” a thousand times. So that when a Democratic administration digs us out of another disaster, she can’t blame them.