The Steel Wars

Pity those people and companies connected to the steel industry. It's a tough business. President Bush probably appreciates this, too, as his steel tariffs come under attack.

To back up a mite, about a year and a half ago, President Bush imposed tariffs (read: taxes) on imported steel, designed to last three years. This made American steel makers such as U.S. Steel (NYSE: X  ) happy, as it helped them compete with otherwise less expensive rivals. But it made many in the international community unhappy, decreasing international firms' steel sales to the United States.

It's not just an "America vs. the rest of the world" issue, though. Far from it. While American steel-producing companies welcomed the tariffs, steel consuming companies did not, as the tariffs increased their manufacturing costs. Examples of significant steel consumers include Ford Motor Co. (NYSE: F  ) , General Motors (NYSE: GM  ) and tool makers The Stanley Works (NYSE: SWK  ) , Black and Decker (NYSE: BDK  ) , Danaher (NYSE: DHR  ) , Snap-on (NYSE: SNA  ) , and Illinois Tool Works (NYSE: ITW  ) . Auto parts makers and steel fabricators also consume a lot of steel.

So while steel makers are pushing to keep the tariffs, steel users are lobbying against them, along with little outfits such as the World Trade Organization (WTO) and the Bush administration's own economic advisors. The WTO is even prepared to allow other nations to retaliate against the U.S. by imposing tariffs on items we export. Yikes.

According to TheWashington Post, "The steep tariffs that President Bush imposed on imported steel 18 months ago have helped the beleaguered U.S. steel industry regain its footing, but likely have had a modestly negative impact on the overall economy and the woeful U.S. job market, the U.S. International Trade Commission has concluded." Other interpreters of recently released data see the tariffs offering more benefit than cost, overall, to the U.S. economy.

The issue is even a mess politically, gaining President Bush support in steel-producing states such as Pennsylvania, but costing him votes in such steel-consuming states as Michigan. Apparently, the smart money is betting on the tariffs being scaled back or removed in the near future.

If you'd like to learn a lot about economics, drop by The Dismal Scientist website (though its content costs a bit). If you'd rather just look elsewhere for stock investment ideas, consider checking out our suite of investment idea newsletters, each of which delivers several promising stock ideas each month.