Americans Aren’t the Ones Who Should Be Mad about Chinese “Dumping”

One of the few issues upon which Clinton and Trump seemed capable of agreement in the second debate was that cheap steel from China was hurting America. Given how alarming Sunday’s exhibition was, it might have been a nice respite. That is, if they had not both been so wrong.

China produces about as much steel as the rest of the world combined. This is due partly to cheap labor and strong domestic demand, but mostly to heavy government subsidies. Now that China’s economic growth has slowed, markets are awash with cheap Chinese steel.  This has led China’s trading partners to accuse China of “dumping” steel.

Dumping, for those not familiar with the term, refers to the act of selling a good in a foreign market for less than the cost of production. It’s against WTO rules and is penalized by tariffs implemented by importing nations. The United States recently levied a 522% tariff on Chinese cold-rolled steel, which is used for construction and to make shipping containers and cars.

The general consensus, dutifully embraced by both candidates, is that dumping is bad for the importing country and an act of aggression by the exporter. But if you think about it, this is pretty absurd.

First of all, countries don’t trade with each other. The United States doesn’t buy wine from Portugal; American companies buy wine from Portuguese companies. We’re not “getting killed” on bad trade deals as Donald Trump fears; there isn’t even a “we” in the sense that he suggests. There are only people, and people don’t habitually engage in voluntary exchanges at a loss. It should be obvious that importers (American companies, in this instance) are the ones benefiting from cheap steel from China. That’s why they prefer to buy it over more expensive steel made domestically.

It’s true that China’s not a market economy in the same way that America is; their government owns and subsidizes far more than ours. That might sound like an advantage for the Chinese, but it’s really not.

Chinese producers are able to sell steel for less because of large subsidies from their government. The people who benefit from this are the people buying and selling steel–importers and Chinese steel companies, respectively. The people who lose are non-competitive firms and those paying for the subsidies…which would be the Chinese taxpayers.

Subsidized exports are really a transfer of wealth from within a country to without. Importing parties are able to be more profitable and productive, which is precisely why Donald Trump builds with Chinese steel and why we’re all better for it. Yes, it hurts American steel companies, but whatever resources are devoted to domestic steel production can be diverted to other areas with better returns.

Conversely, import tariffs are paid by the importer, and ultimately the consumer. In other words, in order to protect us (read: domestic steel companies) from what amounts to discounted steel, our government taxes the hell out of it so that we end up paying more. Saying that this helps our economy is like claiming that rolling up your sleeves makes your arms warmer. Remember that any jobs or income generated by such tariffs comes directly at the expense of American consumers who are being forced to forgo savings or purchases they would have made with the money they saved on steel.

If millions of tons of steel fell from the sky would we draft legislation to tax the heavens? No, we’d take the free steel and build things with it. If China wants to take money out of its citizens’ pockets and use it to make steel for the rest of the world, Chinese citizens should be outraged. But why should the rest of us complain? When someone gives you a gift, the correct response is: “thank you.”

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