Nick’s Note: Last week, President Trump officially slapped tariffs on steel and aluminum imports. I wanted to get a deeper take on how tariffs would affect the U.S. economy. So I called a PBRG friend who is one of the country’s most well-known free-market proponents: John Stossel.

John spent 28 years as an award-winning journalist for Fox News and ABC News, where he anchored the primetime newsmagazine 20/20. He’s won 19 Emmy Awards for his work. After years as a consumer reporter, John turned his focus to reporting on limited government and personal freedom. When it comes to free markets, few are bigger advocates than John…

Nick Rokke: John, we’ve been writing about President Trump’s steel and aluminum tariffs the past few weeks in the Daily. What’s your take on them?

John Stossel: They will be terrible. Let me tell you why…

This isn’t the first time the U.S. has put tariffs on steel. President Bush did this back in 2002. It cost 200,000 jobs to protect 10,000 jobs in the steel industry. Everyone could clearly see the tariffs weren’t working, so President Bush smartly withdrew them.

The bottom line: Tariffs don’t work.

Nick: But Trump said it’s in our national interests to stop China from dumping steel here. Why don’t you agree?

John: Dumping sounds bad, but it’s not. What it means is that China has subsidized its industry (if that’s even true) to sell steel at below-market rates… and that they’re screwing Chinese taxpayers to sell Americans cheap steel.

For something to be subsidized, the government has to support it. And the government gets its money from taxpayers. So Chinese taxpayers are giving us cheap steel and we’re giving them fiat currency (U.S. dollars). The steel is far more valuable.

That’s because thousands of American companies can use this cheap steel to make millions of new things like cars or buildings.

Yes, it unfairly hurts some U.S. steel workers. But it helps many more people in industries that use steel.

The free flow of goods is much more valuable than doing tit-for-tat tariffs. We should cheer “dumping.”

Nick: Aren’t you concerned about American steel companies going out of business?

John: I am concerned about them. But what often happens is that competition makes these companies more efficient—and better—in the long run. Competition creates what we call “creative destruction.” Creative destruction is when something new and better brings about the demise of whatever existed before it.

Right now, imports make up a minority of steel in America. Most of that comes from Canada, Europe, and South Korea. China only accounts for 3% of our steel imports. The Chinese imports aren’t what’s putting U.S. steel mills out of business.

I will say that if the last mill in the U.S. and Canada was about to close because of cheap imported steel, I would worry. But that’s not the case now…

Even then, it wouldn’t be in China’s interest to stop trading with us. They’d need to do something with the steel that they’re making, and that means selling to us.

Nick: So how will tariffs affect people like you and me who aren’t in the steel industry?

John: Well, things are going to cost more… more than what we’re being told.

Commerce Secretary Wilbur Ross couldn’t even get his math right on how much tariffs would increase the cost of a can of beer or soup. It’s not a fraction of a cent like he said. It’s going to go up 2.5 cents per can.

When you multiply that by millions of cans—and cars, and everything else that uses steel—the cost of the tariffs turns out to be in the billions.

And the new jobs these tariffs “create” come at a cost. What will this cost be? $500,000 per job? That money is coming straight from the pockets of American taxpayers.

Trade is always good because it’s voluntary. If a company is getting a bad deal, it doesn’t have to trade. But the company will trade if it’s better off. It has to be a win-win deal for both sides, or it doesn’t happen.

These tariffs will make everything that uses steel more expensive… and everyone outside the steel industry will be worse off because of it.

Nick: I know you have to run to get on the set at Fox News… so I’ll let you go. Thank you for taking the time to talk today.

John: You’re welcome. It was a pleasure.

P.S. When it comes to following the big issues of the day, John Stossel’s YouTube channel, Stossel TV, is a must-see at the Palm Beach Research Group offices. Like the Daily, John goes beyond the mainstream headlines to show you what’s really going on.

John’s not afraid to take on controversial topics like the “War on Drugs,” “Food Police,” or “Hate Speech” … and tell you why the government should keep its nose out of people’s personal lives.

But unlike the mainstream media, each of John’s episodes are informative and entertaining. You’ll walk away with a great understanding of—and appreciation for—free market principles.

If you’re fans of free markets like we are at the Daily—or just want to learn more about economic freedom—Stossel TV is the best resources we know of out there—and it’s free to subscribe. But don’t wait… John’s adding new episodes every week, so you don’t want to miss his latest commentary. Click here to watch now…

CHART WATCH

Steel Prices Due for a Rebound

Buy the rumor, sell the news…

It’s an old Wall Street adage which works time and time again.

We told you to buy the rumor of steel stocks taking off back in June. And steel stocks soared… especially U.S. Steel (X), which doubled in that time.

We then said in our March 6 issue that we might see a short-term sell-off in steel companies.

As you can see in the chart below, U.S. Steel is down 18% since its peak the following day.

This fall happened despite U.S. Steel raising full-year profit estimates by 15%.

The problem was that some analysts expected U.S. Steel to raise profit guidance by 33%. After all, steel prices should be higher, and the company is going to reopen a factory.

It’s just another case of analysts overestimating the effects of news—this time being Trump’s tariffs.

Expectations are now coming back to realistic levels. That’s why “buy the rumor and sell the news” works again and again…

Steel is gearing up for a big rally, but it’s not time to get in yet. I’ll be watching this trend closely and will keep you posted in future issues of the Daily.

—Nick Rokke

IN CASE YOU MISSED IT…

Over 35,000 people signed up to join Teeka Tiwari last night to learn about the cryptocurrency Second Boom. And in his presentation, he talked about one of the highest-potential crypto projects in the space today.

If you missed last night’s webinar, don’t worry. Teeka’s decided to keep the presentation online for just one more day. So if you haven’t seen it yet, make sure to check it out right here while it’s still online.